FAQS – Keyman Insurance

Below are some of our frequently asked questions regarding Keyman Insurance. To receive the best assistance and advice please give our team a call on 0116 366 6866 or use the form to request a call back. 

See our main page on Keyman Insurance

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.

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