Insuring Key People
Key-person Insurance
Directors and employees with special skills, knowledge or experience are the key employees of the companies they work for. If a company loses one, whether through death or an inability to work, that loss can damage the business, often irreparably so.That is why taking out key-person insurance to protect the company is almost essential, particulalrly for smaller companies who are very dependant on one or two key individuals.
The lump sum from a Key-person insurance can provide :
- Meeting the costs of a temporary replacement
- Meeting the costs of recruiting a permanent replacement
- Meeting the cost of death or incapacity of a key person.
The type of cover and benefit provided will depend on the type of policy, but companies who ignore the risks of losing key staff members do so at their peril. Customers, Creditors, Shareholders, Suppliers and the Bank Manager may not be as sympathetic as you think.
Take a moment to consider who the most important person in your business is. Then consider what you would need to do if they disappeared today....
Share protection through life assurance
Directors' or partners' share agreements are a way of ensuring that the remaining directors have the right, or sometimes the obligation, to purchase the shares of other shareholding directors when they die. However, it is not unusual for remaining directors not to have sufficient funds to hand when a fellow director passes away unexpectedly and, if they haven't, things can get messy. You may have got on well with your fellow directors but what about having to get along with their partners, or indeed their children.
The obvious route is to ensure against such an eventuality and avoid such a dileman completely. Taking out appropriate life cover is the simplest way to ensure there is an adequate source of funds when needed.
Unlike taking out some simple family based life cover there needs to be understanding and agreement between all the parties concerned. It also requires care to ensure that the appropriate level of cover is put in place. Once this has been done though it should be a comfort (like all worthwhile insurance) for all the directors or partners to know that in the event of an unexepected death, the other directors will have sufficient cash available to carry out the terms of their shareholders' agreement.
A simple question then. If one of your director’s or partner’s died today, who would inherit their shares ? And would you want to work with them ?
