Key Person
What is key person insurance - How much is it and who should get it?
There are many options available to protect your employees, however could your business survive if key staff members or directors were no longer around?
There are many options available to protect your employees, however could your business survive if key staff members or directors were no longer around?
What is key person insurance?
As a business owner you will be used to implementing health and safety rules in your work place, supplying first aid boxes and putting up warning signs of any hazards to help protect your staff from injury. As a Key Person / Director, most businesses would not survive without its senior staff this is where extra measures can be taken beyond basic health and safety.

Research by leading provider Legal & General, states that almost half of businesses would close if a key person within the company became critically ill or died. It is hard to put any warning system in place for such events however a business can implement additional protection called Key Person Insurance (also referred to as Key-man cover). This type of insurance protects any businesses potential loss of profits, repayment of loans or even helps with costs of replacing a staff member or Director who is crucial to their position.
What does key person insurance cover?
Senior staff are typically defined as somebody who is crucial to the financial success of a company. This is sometimes hard to define, but could be a business founder, a top sales person or someone with niche skill set like a website developer. Similar to a Life Insurance policy it will pay out if that person/group of people pass away or become critically ill (if critical illness cover is included).
This payment is then used to cover the costs of finding replacement staff/Directors or can replace loss of profit. If a business is requiring bank loans key person insurance may also need to be included, as this gives the lender reassurance for the return of payment. Key Person insurance can also provide a payout in the event of a critical illness or long-term disability. There is also Key Person income protection which can help fund a salary.
How does key person insurance work?

Premiums are calculated on age, health and lifestyle, with the business paying the premiums and being the beneficiary of payouts. The cost will depend on how long the policy is taken out for (term), as well as the level of cover required. The amount of protection taken is usually, either a multiple of the salary or the profit/turnover they create and how long it would take to recover or alternatively the cost of replacing the staff.

Is key person insurance tax deductible?

In general, if you get tax relief on the premiums then the payout will be taxed as this will boost profits pushing up your corporation tax liability. If the business decided not to receive tax relief then it is likely the payment would be treated as capital rather than profit so won’t be taxable. Advice given would always be to check with HMRC or a certified accountant, as it is down to HMRC’s interpretation of any liabilities that could be due from a payout.

When should you consider key person insurance?
Key Person Insurance provides businesses with continuity. There are plenty of circumstances where you should consider Key Person Insurance, when starting out you may be reliant on a key group of individuals or for more established businesses may need particular staff with particular skillsets. As a business owner you will find staff are an essential cog to any successful company, So losing a key team member can have detrimental effects on profitability and can cause a degree of uncertainty.
Small businesses would normally have an influential founder, whose ideas and leadership may be lost on departure, with key salespersons losing this generated revenue may not be easily replaced. Having Key Person Insurance can alleviate any uncertainty of a loss of an individual/group and will ensure the business can continue to operate limiting any disruptions. For many company owners this should be part of any business plan.
How much does key person insurance cost?
Costs of premiums can vary from providers offering these types of insurance. The amounts payable by the business will be similar to Life Insurance on the individuals being covered as well as the level of protection required. An estimation of how much profit would be lost, how much it would cost to find a replacement and any other potential losses to the business would need to be calculated. The level of cover you have the more the premiums would cost the company. A consideration would also have to be made that if the individual left the business premiums would still be ongoing however in this situation the insured individual can usually takeover the product and mange this themselves.

There are lots to discuss and factors think about when searching for Key Person Insurance for example who to cover, the costs involved and for how long should premiums be paid as well as considering any of the tax liabilities. As with all financial products, Key Person Insurance providers will vary on rates and the terms conditions of the contract, so searching the whole of the market is important when receiving a quote for your business.

Comparing key person insurance quotes and securing the best cover for your business.


When finding the most suitable Key Person Insurance it is important to speak to competent protection specialists that can provide you all the information needed to maximise policy protection whilst working within company budget.

We are regulated to give advice and experienced to help you decide what is right for your business. We work within budgets and only use the UK's very best insurance providers.

We do not charge for arranging quotes and reviewing policies we may only receive a fee from the chosen provider if you did decide to take a recommendation from us.

All advisers are now able to conduct reviews via telephone with documentation being emailed and posted. We are here to help you with any questions you may have our friendly team are experienced and will ensure the upmost care is taken when advice is given.

Comparing key person insurance quotes and securing the best cover for your business.


When finding the most suitable Key Person Insurance it is important to speak to competent protection specialists that can provide you all the information needed to maximise policy protection whilst working within company budget.

We are regulated to give advice and experienced to help you decide what is right for your business. We work within budgets and only use the UK's very best insurance providers. 

We do not charge for arranging quotes and reviewing policies we may only receive a fee from the chosen provider if you did decide to take a recommendation from us. 

All advisers are now able to conduct reviews via telephone with documentation being emailed and posted. We are here to help you with any questions you may have our friendly team are experienced and will ensure the upmost care is taken when advice is given.
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