Key Person Insurance

Key Person Insurance

Some small to medium-sized businesses depend heavily on Key Person insurance or a group of people; without them, the business wouldn’t be able to operate. In these businesses, that creates an unacceptable level of risk, since there are others that depend on the business’s success. Talk to Digital Insurance Brokers Ni to find out more.

Key person insurance broker

Small to medium-sized businesses often owe their success to one or two key people who are the driving force and strategic thinkers. Sometimes the business owes all or a large proportion of its income directly to that person or persons. If this person passed away or became incapacitated, the business would likely be unable to operate, at least in the short term.

When that’s the case, it makes sense to protect the business by taking out key person insurance. This is effectively a life insurance policy where the business, rather than a relative, is the key beneficiary.

Key person insurance can payout as a monthly benefit to keep the business afloat until managers can find a way to adapt to the loss of that key person. Or, the business can receive a lump sum that it can use to pay off debts, distribute money to investors and close the business down in a fair and orderly manner.

If a person operates as a sole trader, then personal life insurance or income protection insurance may be more appropriate to provide for their dependents if they were to pass away or become unable to work.

Understanding the different options available and getting the right insurance, whether it’s key person insurance or another type of cover, can be confusing and time-consuming.

To get the right coverage, you need to talk to the experts in key person insurance.

Digital Insurance Brokers Ni is an independent broker with extensive experience in key person insurance.

key person insurance
key person insurance

Digital Insurance Brokers Ni can help you:

  • find the best insurance cover for your business’s needs
  • review cover from the broadest range of insurers
  • understand premiums and risk management
  • manage insurance claims for a better outcome.

Getting the right insurance

Some businesses are built on the force of a single personality, while others just depend on one person to keep everything together. To decide whether your business needs Key Person insurance, think about what would happen if that person were suddenly unable to work and couldn’t pass on their knowledge, experience, or processes.

If that would mean a death knell for your business, then you may need key person insurance.

Planning is key to business success. Surveys have found a direct correlation between a strong planning process and business growth. Worryingly, very few Northern Ireland small- to medium-sized businesses have an exit or succession plan in place.

Key person insurance can form an important part of your contingency plan and it can be a valuable way to reduce risk in your business. Understanding whether key person insurance is right for your business and, if so, what type of cover is best, can be difficult.

It’s important to work with an experienced broker to find the right cover. They’ve done the research and investigation so you don’t have to, and they can provide you with a range of options that suit your needs and budget. 

Here are four things to look for

1BenefitThe amount your key person is insured for depends on their value to the business and, in general, you should insure them for as much as you can afford. Start by honestly assessing their value to the business so you have adequate funds to maintain the business.
2TermsSome insurance providers will push you towards policies with higher premiums and commissions, which usually include cover you may not need. For a key person, term insurance is usually the most beneficial and cost-effective.
3ChoiceThe right policy will let you choose what you use the benefit for, whether that’s covering existing expenses, hiring new staff, or winding up the business.
4OwnershipThe person or entity that owns the policy should be the same person or entity that operates the business but there is flexibility in how key person insurance can be set up, so make sure you talk to your broker about the options.

Choosing the right insurance for your business’s needs depends on a broad variety of factors. Working with an independent, transparent insurance broker like a member of Digital Insurance Brokers means you don’t have to spend time and resources investigating all the options and hoping you don’t miss something. Your broker will be able to find the right policy for you and you may even end up paying less than you think for your preferred policy.