Does My Small Business Need Key Man Insurance?

Chris Evans in Key Man Insurance
March 13th, 2016

Does My Small Business Need Key Man Insurance? 

Yes, in most cases very much so. Obviously it is dependant on whether the businesses success and profitability is reliant on key people. If it is you may wish to think about taking out key man insurance. Most small businesses tend to have one or two directors or staff members who are the backbone of the business, without these people the business will lose valuable knowledge or income. Should this happen the business may become financially unstable, which could lead to bankruptcy or liquidation.

Smaller businesses in comparison to larger businesses tend to have a greater dependency on a specific ‘key’ staff members, there tends not to be staff of the same skill or calibre within the business who can easily replace the ‘key’ person should they become critically/seriously ill. For that reason, it can be a more important insurance for smaller business to have.


Would My Small Business Need to be a Limited Company?

No, not necessarily. All businesses who have staff member’s integral to the success of the company should look into Key Man Insurance. This can be a partnership, limited company or even a sole-tradership.

As long as the business needs the cover to protect it from the financial consequences of loosing a key staff member, it doesn’t matter whether the business is a limited company or not. However, if the business is a limited company there are tax savings benefits to having a policy, as the policy premium can be a deductible business expense.

What Is the Cost of Key Man Insurance?

The cost of Key Man Insurance can vary depending on the need of the business. Areas which can affect the cost are, the amount of cover the business is looking for, the health and medical state of the person being insured, the provider, the level of cover chosen and the term the policy runs for.

If you are looking for an affordable policy, it is worth speaking to a specialist broker. They will be able to help you define how much cover you need, whilst providing you with quotes from providers and advice on how to proceed.

Would I need to Have a Medical? 

No not always. People tend to assume that a policy insuring a person’s life will mean that they have to have a medical, but these are not always necessary. You may need a medical if you have had serious medical or health issues in the past, or if you are looking for a large amount of cover. If you don’t have time for a medical or would rather not have one, speaking to an adviser may mean you can avoid this. Insurers do use alternative methods, such as getting information from a GP or by conducting a tele-med. An over the phone medical interview.

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