Keyman Insurance - The Basics
Published: 23/10/2019 By Sarah-Jane CreanWould your business survive if a key person (director or employee) dies or is incapacitated indefinitely?
Keyman insurance is a type of insurance taken out usually for limited companies but it can also be acquired by a sole trader and partnerships. The business takes out a policy in order to insure itself against any financial losses resulting from the death and critical illness, if required, of a key person (director of employee) either through death, critical illness or disability. Obviously check what the insurance policy actually covers before it is taken out.
A keyperson is someone who is vital to the continued financial success of the business.
The insurance premiums can be off set against corporation tax so long as the following conditions are met.
- Sole reason of the insurance is for the purpose of replacing a financial loss resulting from a loss of work from the key person.
- Insurance must be term insurance providing cover for the individuals only during the term of the policy and only while the individuals are working for the employer
Upon a successful claim the company will receive a lump sum benefit which is then liable to corporation tax. This lump sum can be used to cover potential loss of profits, recruitment costs to replace the key person or to repay loans taken out by the business.
This is definitely something that all business should seriously consider. As questioned above would your business survive if a key player dies or is incapacitated indefinitely?
If this is something you would like to discuss further please do not hesitate to contact Martin Card of TBA Wealth on 020 8661 7878 or drop him an email at firstname.lastname@example.org