Keyman Insurance – Protection From The Loss Of Key People
Keyman Insurance protects your company from potential damage or loss in the event of a ‘key’ person within the business suddenly become unable to work due to death or illness. A cash lump sum would be paid to your company to compensate for any loss of revenue and profit.
Halo Consulting is a Midlands based Insurance Broker working with both national and international clients to provide both individual and company insurance. We deal with many of the major insurers within the UK such as AXA, Aviva, Vitality and Bupa to provide no-obligation quotes and to find you, our clients, the best cover at the lowest possible cost.
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By reviewing quotes from a variety of insurers, we can provide you with the most cost-effective policy to satisfy your needs.
Why Would I Need Keyman Insurance?…
Who are the most important ‘key’ people in your business?
How integral to your business is your Managing Director? Without their vast knowledge, experience and important contacts, the business could struggle.
Do you have a star salesman who brings in high levels of business? Without their leads and sales, your profit margin could take a direct hit.
Do you rely on a highly-skilled engineer to manage your machinery? In their absence, business-critical operations could halt.
Do you have an IT Manager or Developer who looks after your systems? IT systems underpin many business functions, which could suffer in their absence.
Do you work closely with a Finance Manager or Financial Controller? Without their advice and expertise, big decisions may become riskier.
Without Keyman Insurance, you could face financial pressures, reduced cash flow and even a loss of customers. By putting in place protection to safeguard against the loss of the most important people in your company, you can rest assured that your business will be robust enough to stand the impact.
What is a ‘key man’ policy and who can take this out?
To protect a company from the loss or absence of a ‘key’ man or woman in their business, this form of insurance can be taken out by any company.
Does the company own the policy?
Yes, the business would own this type of policy.
Does the company pay for the policy?
Yes, policy premiums would be paid by the business and can also be offset against corporation tax.
How much does Keyman Insurance cost?
For an accurate quote you would need to contact us – usually, policies are priced depending on the amount insured and the term, as well as age and smoking status.
What is the length of this policy?
From 1-55 years – we strongly advise reviewing assured sums assured regularly to make sure the cover is aligned with your business.
Does it take a long time to set up a Keyman policy?
Usually, we can arrange cover fairly quickly – however, it may take longer if you require a higher level of cover. Sometimes, to justify the insured sum, the insured may need financial underwriting or they may need to undergo a medical.
Does the company need to be U.K.-based to take out the cover?
Yes, a Keyman policy can only be taken out for a company based in the U.K.
How do I know what amount to insure the ‘key man’ for?
As every company is different, here at Halo Consulting, our trained advisers will be able to analyse all information given to us, which will allow us to put forward a solution to meet your needs.
Are Keyman policy premiums tax deductible?
Yes, you can offset premiums against corporation tax. We strongly advise speaking to your financial adviser and your accountant about this.
Instead of a lump sum, could we take an income?
Sometimes, the sum can be paid as a monthly figure instead. However, usually, money is transferred as a lump sum. We strongly advise speaking to your financial adviser for further guidance.
What other benefits can be added to the policy?
Benefits such as Critical Illness, Waiver of Premium and Indexation can be added on to Key Man Insurance.
Do we need to send out medical information?
Insurers will need all insured persons to complete a medical questionnaire (the same as any life insurance policy). Plus, further information may need to be gathered from their GP.
What can we use the cash for when a policy pays out?
Paid directly to the business, the sum assured would be used how the business chooses. It could be used to recruit a replacement if the key man or woman has died or temporary staff until they are well enough to return to work.
What about inheritance tax – how is this affected?
A Keyman Insurance policy could increase the value of the business due to the sum of money received, as well as the value of shares held by the individual. In turn – this could increase Inheritance Tax liability due to the increased value of the estate, especially if the key man or woman is a director or shareholder.
What defines the term ‘key person’?
Any important person in your business – a ‘key man’ is someone who would have a financial impact on your business if they were not able to work due to a serious illness or death.
What is the difference between Life/Critical Illness cover and Keyman Insurance?
Life or Life & Critical Illness policies are similar types of products, but are taken out by an individual to benefit them or their family. Keyman Insurance is a specific type of Life or Life & Critical Illness policy, which is taken out by a company with the aim of providing financial support to the business should the key man or woman die or suffer a serious illness and is unable to work.
Why is this cost-effective for companies?
Losing a ‘key person’ could have a large impact on your business. Compared to the financial repercussions of such an impact, the cost of this insurance could be minimal. Please speak to one of our team of advisers for a quote.
What does the term ‘Anderson rules’ mean?
The ‘Anderson Rule’ applies to how the proceeds of Keyman Insurance are treated for tax purposes and due to the fact that every case is different. We strongly advise speaking to one of our advisers about your specific case.
How can a company assign a policy to a ‘key man’?
Usually the change to a policy is done through a “Deed of Assignment”. You would need this to be written up by a solicitor for legal purposes.
This information does not constitute financial or any other form of professional advice. Should you require advice, please contact us directly on 0116 366 6866. It is important to ensure any insurance policy you take out is suitable for your needs.
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