Ask the Expert Key Person Protection

I run a small company that employs 10 people.  One of them is our sales manager who has become absolutely essential to the success of the business as he knows all of our customers really well and is the person they know and trust.  I don’t, as I am involved in the background with the overall management, supply, build and accounts side of things.  If I had an accident or illness, someone else could do my work for a while as it’s all well documented, whereas if anything happened to him, our profits would certainly be affected.  Can I insure against him being unable to work?

Carl responds

In any business there will be certain people who are critical to its day-to-day success and profitability.  Sometimes these will be the business owners, but on other occasions, the critical people will be those who have key knowledge and contacts, such as your sales manager.

Key person insurance is specifically designed to protect the business against the sudden temporary or permanent loss of someone who is critical to a business.  It can be taken out against the life and health of any member of the team that you consider is fundamental to your profitability.  You can also insure more than one person, if you need to.

Key person insurance can be set up to pay out if a named individual is unable to work because of one of the illnesses or conditions specified in the policy, including permanent or total disablement, or if that person dies.  Your business pays the premiums and in the event of an upheld claim, the money will come to the business.  It will deliver a lump sum that will provide you with sufficient funds to do what’s needed to get your business back on track.  That might mean protecting profits while your sales manager recovers or while you recruit or train someone up to replace him or her, for example.

Many insurance companies that provide this type of cover will also give your employee access to medical help and legal helplines.

In addition, I don’t think you should underestimate the impact of you being out of commission.  Even if you have others who could temporarily carry on your role in your absence, this is likely to have an effect on your business as you would be drawing on resources normally deployed elsewhere.

I strongly recommend that you discuss your business protection needs with an independent financial adviser to ensure that you have plans in place for a range of eventualities that could derail your company’s financial stability.

This is a marketing communication.  Any opinions expressed in this article do not constitute advice.