Few business owners would embark upon running a business without insuring their premises, vehicles, stock and the possibility of becoming liable for injury or damage to staff and/or customers as a result of their business operation.
Yet it is quite commonplace to carry on a business with insuring against the risk of losing the personal input of its most valuable assets – namely you and other key staff such as the finance or sales directors and managers.
- For a company employing 3 executives aged 30, there is a 50% likelihood that one of them will die before age 65.
- There is a 1:4 chance that a 45 year old male will die before 65.
- 1:10 men aged 25 will have a heart attack before age 65.
- The average time lost due to serious illness lasting over 6 months is 6.5 years.
- 1 in 3 in the UK will develop some form of cancer during their lifetime; someone is diagnosed with it every 2 minutes.
- The most common cause of death in the UK is coronary heart disease. Around 1 in 5 men and 1 in 7 women dies from this disease.
A person holding a position of responsibility in a business is a vital asset so their incapacity or death could seriously disrupt the business and adversely affect its profitability. Even if it is possible to replace such a key man, the business may still suffer a heavy loss whilst a successor is being trained , or gaining experience and building up contacts.
The employer clearly has an insurable interest in the life of such a key man up to the amount of anticipated financial loss and can take out a policy on their life.
Types Of Cover Available
In the event of the insured Key man dying, the sum assured will be paid as a lump sum; provided the death occurs within the Term of the contract.
Terminal Illness Assurance
The sum assured will be paid out if the life assured satisfies the provider’s definition of a terminal illness.
Critical Illness Insurance
In the event of the insured being diagnosed as suffering one of the designated critical illnesses, the lump sum benefit will be paid. Usually the insured life must survive for a period - usually one month.
For example, a heart attack may result in death, this would cause payment under the "Life Insurance". If the heart attack is not fatal, then a claim is paid from the Critical Illness policy.
Quite often the result of a critical illness can be as damaging to an employer as the death of the Keyman.
Because the immediate effect of loss of a Key man can be catastrophic, it is usual to have a combined Life Insurance and Critical Illness Policy.
Key Man Income Protection (Permanent Health Insurance)
In the event of the Insured person being too ill to work, the employer will receive an income to meet locum costs for up to two years.
If you are interested in getting a quote of costs and benefits for Keyman Assurance on your Directors or other Key Personnel, please contact us here.