Key Person Protection

Financial Planning from Rowlands & Hames.

Key Person Protection

Key person protection helps protect a business against the financial fallout of a ‘key person’ dying, falling terminally ill or, provided critical illness cover has been taken as an optional extra, falling critically ill during the term of the plan.

Whether they provide expertise, contacts or other assets, losing a key person can be very damaging. The business could be hit by a loss of profit, reduced sales, recruitment/training costs and disruption to their plans, to name but a few potential problems.

How do you identify a ‘key person’?

In almost any business, there’ll be a few people who make a major contribution to the company’s profitability. People whose skills, experience or expertise would make them difficult to replace.

Examples of key people include:

  • managing directors
  • technology specialists
  • sales managers
  • other individuals with specific skills

How does the protection work?

With Key person protection, you as the business owner, take out a life insurance plan, with or without optional critical illness cover, written on the life of the key person. The plan is owned by the business, which also pays the premiums. Any payout is therefore paid to the business, which could use the money to, for example, recruit or train a replacement.

Key person protection is available in the form of term assurance with or without critical illness cover.

For more information, the British Insurance Brokers Association has created a guide which can be found by clicking here.