Business Protection &
Key Man Insurance

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What is Key Man Insurance and why you need it?

What is key man insurance – Key Man Insurance is used by businesses to ensure they have protection should a highly valued employee, or Key Man, be unable to work. A Key Man can be described as an employee whose absence would cause a severely detrimental effect to the efficient running of a business. For example, this could mean their absence causes a drop in profits or the daily business functions are unable to continue.

Losing a vital staff member or a company director could have a dangerously adverse effect and could result in a decrease in sales and profit, additional costs in hiring a replacement, or added stress and workload for colleagues.

Who is considered a Key Man? – This is entirely dependent upon the type of business and the nature of their industry or trade. A software development company would consider the loss or absence of a software programmer as extremely detrimental to their productivity. Whereas for a sales company losing a director of sales could have an immediate impact upon profit. In broad terms, a Key Man is any individual whose knowledge, skills or experience a company relies on to function profitably.

Why do I need Key Man Insurance for my business? – Key Man Insurance policies are owned by the business and not the individual employee that is covered. So no matter the reason for the absence of a Key Man, the business should be protected and reimbursed financially by this tax-deductible expense. The policy could also include Critical Illness cover so should there be a longer period of absence, the financial stress and implications of this could already be taken care of, reducing the pressure on other staff members.

 

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What is Relevant Life Insurance?

A Relevant Life Policy is similar to life insurance or a death in service benefit. Should an individual pass away during the length of the policy, a lump sum could be paid to their family or dependents. One of the main differences between the two policies is that a Relevant Life Policy is more tax-efficient, as well as being a major incentive or benefit for employed staff members.

A Relevant Life Plan is paid for by the business or company but covers the individuals they employ. This means that not only does the company offer this as an employee benefit but also it is also considered a legitimate business expense and is, therefore, tax-deductible.

Who benefits from Relevant Life Cover? Despite being taken out and paid for by the individual’s employer the policy pays out to the family or dependents left behind should an employee death occur. The company itself does not benefit from this policy directly. Relevant Life Cover is legally written in trust, which ensures that the money is issued to the named receiver. This type of policy means that the lump sum is also issued as tax-free.

All premiums paid to a Relevant Life Policy by a company or organisation fully qualify for exemption from tax, this includes Income Tax, National Insurance and Corporation Tax. Purchasing this type of policy saves money when compared to a standard Life Insurance policy. It is legally written into trust so is not subject to Inheritance Tax and is not considered a taxable sum at all. So not only does this type of policy ensure the most cost-effective benefits for businesses but also provides for their employees & dependents when they need the most support.

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