Key Person Assurance

Every year there are Assurance claims made for 100,000 deaths and 350,000 new incapacity claimants between the ages of 15 and 65.*

On average over the last 10 years, 2.6m people have been off work for longer than 6 months and claiming benefit, that’s approximately 1 in 10 of the workforce.** In addition 109,000 working age people were diagnosed with cancer each year*** and 20% of 16-44 year olds and 42% of 45-64 year olds report having longstanding illness.****

Assurance plans such as Life Cover, Life and Critical Illness Cover or Income Protection plans are often used to counteract the financial loss that may arise from the death or extended incapacity of a member of your business, using the sum assured to ensure the continuity of the business.

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

• 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.
• 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.
• 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 or woman’ could be anyone directly associated with the business whose loss can cause financial pressure to your business; this could be a key project managers and sales people, a Director, a Partner or simply people with specific skills or knowledge which you specifically value and may find difficulty in immediately replacing.

Sources: *ONS (2008), **DWP Statistics ***Cancer Research UK (2010), ****ONS General Lifestyle Survey (2007)