We all recognise that people are the most valuable asset in any business.
Keyperson Cover, also known as Keyman Cover, is a policy that businesses can invest in to safeguard themselves against the financial consequences arising from the death or critical illness of an employee (or Director).
Typically, this type of policy provides a lump sum payout upon the diagnosis of a Critical Illness, which the business can utilise in various ways. Some common applications of the payout include:
- Sustaining Employee Payments: The funds can be used to continue paying the affected employee during their illness, ensuring their financial security and supporting their recovery.
- Replacing Lost Income/Revenue: If the employee generated a significant portion of the company’s income or revenue, the payout can help cover the financial shortfall resulting from their absence.
- Hiring a Replacement: In situations where the employee’s absence leaves a critical void, the funds can be used to recruit and train a suitable replacement to ensure smooth business operations.
- Meeting Contractual Obligations: If the business is unable to fulfil its contractual commitments with clients due to the absence of the key employee, the payout can be utilised to cover penalties or refunds owed to the affected clients.
- Repaying Business Loans or Capital: The funds can be used to fulfil business loan repayments or repay the capital borrowed, helping maintain financial stability during challenging times.
A wide range of insurers offer Keyperson/Keyman cover. As with any insurance product, it is crucial to seek professional advice to determine the right product and insurer for your specific needs. It is worth noting that most insurers exclude children’s critical illness cover from their business policies. However, for small businesses or self-employed individuals, it is important to consider including this coverage since a child’s critical illness can significantly impact their ability to work.
By securing appropriate Keyperson Cover, businesses can mitigate financial risks associated with the absence or illness of key employees, ensuring continuity, and protecting the company’s long-term success.
