Key Man Insurance

Key Man (or Key Person) Insurance is essentially a form of life insurance for businesses. It is generally taken out by a business to compensate for financial losses that would arise from the death or extended incapacity of the key individual(s) of the business specified in the policy, and in turn ensure the continuity of the business.

The policy does not cover actual losses incurred, but instead compensates with a fixed monetary sum as specified on the policy itself.

There are generally three categories of loss for which Key Man Insurance can provide compensation:

  1. Protect losses related to the extended period when a key person is unable to work; to provide temporary personnel; and, if necessary, to finance the recruitment and training of a replacement.
  2. Protect profits such as offsetting lost income from lost sales; or losses resulting from the delay or cancellation of any business project that the key person was involved in; or loss of opportunity to expand, loss of specialised skills or knowledge.
  3. Protect anyone involved in guaranteeing businesses loans or banking facilities. The value of insurance cover is arranged to equal the value of the guarantee given by the key person.

As a result, a Key Man can be anyone directly associated with the business whose loss can cause financial strain to the business. For example, they could be a Director of a company, a Partner, key sales people, key project managers and people with specific skills or knowledge which is especially valuable to the company.

The Clifton Wealth team of independent advisers assess businesses and make recommendations every day for Key Man Insurance, whether for Directors, Partners, Shareholders or Key Employees.

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