Key Person Insurance
Protect your business against the financial impact of losing a key person.
Key Person Insurance protects a business against the financial consequences of losing a key employee or director through death or serious illness. The policy is owned by the business and pays out to the business — providing funds to cover lost profits, recruitment costs, or loan repayments.
What is Key Person Insurance?
Key Person Insurance is a life insurance or critical illness policy taken out by a business on the life of a key employee or director. The business pays the premiums and is the beneficiary. If the key person dies or suffers a critical illness, the policy pays a lump sum to the business to help it survive and recover from the financial impact.
Who is it suitable for?
Key Benefits
Tax Considerations
The tax treatment of Key Person Insurance depends on the purpose of the policy. Where the policy is taken out to protect against loss of profits (an income purpose), premiums may be deductible as a business expense and the payout may be treated as a trading receipt. Where the policy is taken out to protect against capital loss (e.g. to repay a loan), premiums are generally not deductible and the payout is not taxable. We recommend seeking independent tax advice to ensure the policy is structured correctly.
Tax treatment depends on individual circumstances and may be subject to change. We recommend seeking independent tax advice.
Example Scenarios
Loss of a key salesperson
A technology company's top salesperson, who generates 40% of revenue, dies unexpectedly. The Key Person Insurance payout covers 12 months of lost revenue while the business recruits and trains a replacement.
Critical illness of a director
A company director suffers a stroke and is unable to work for 18 months. The Key Person critical illness payout covers the cost of a temporary replacement and the lost profits during his recovery.
Business loan protection
A business has a £500,000 bank loan secured against the business. Key Person Insurance ensures the loan can be repaid if the key person who secured it dies, preventing the bank from calling in the debt.
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Why Choose JK Insurance Brokers?
- Whole-of-market access
- FCA authorised & regulated
- No broker fees
- Business protection specialists
- Personal, one-to-one service
- UK-wide advice