Key person insurance is a type of business insurance policy taken out on an invaluable company executive or employee. Also known as key man insurance or business life insurance, the purpose of the policy is to help the company offset some of the financial losses brought about by the untimely death of a ‘key’ employee.
When you’re shopping around for key person insurance, you should start by working out the insured sums you require, as we’ve shown above. You will need this to compare policy prices and to see whether insurers provide the amount of cover you need. The next things to consider are whether the provider offers only life cover, or life and critical illness cover.
Finally, it is worth looking into the level of support offered with your policy, and how much the provider can guide you. Losing a key employee is personally devastating, and it can help to have support in place to help you allocate funds and get the business back on its feet during an emotionally exhausting time. Extra support for the company is especially important, too, if the key person insured was usually responsible for business operations and strategy.
Finding a Provider
- Comparison Sites – When comparing policies on online comparison sites, it’s also crucial to bear in mind that the quotes you see won’t always reflect the final price that you may end up paying. As with life insurance, the policy depends hugely on the specific details you provide about the person insured. The same level and length of cover can vary hugely in price depending on how the insurer assesses their risk, so what looks like the cheapest option at first glance may end up being more expensive once you’ve built up your policy.
- Insurance Brokers – Most financial advisers and insurance providers now offer key person insurance. With so much choice, it can be tricky to find the best policy for you. Brokers can help you find better deals with lower premiums and more extensive cover. They have the industry knowledge necessary to compare the intricacies of the different policies offered by various providers. Brokers often have access to policies that are not available directly to customers, and for reduced prices, too. Often, these low deals absorb the commission taken by the broker as well, making it still a cheaper option for the end customer. The British Insurance Brokers’ Association, BIBA, offers a helpful Find a Broker tool, providing a list of brokers which all adhere to the association’s exacting standards.
Key Person Insurance Providers
To help you begin your search for an insurer, you can start by looking at the insurers in this list, which features some of the most popular and well-known insurance providers offering key person policies. Be sure to do your own thorough research before you reach a decision.
AXA
A reputable and experienced insurance provider is AXA. They don’t offer their key person insurance directly to customers, but it is one of the cover options they provide as part of their business insurance through brokers and intermediaries. They have extensive experience in the life insurance industry, offering a high-quality service.
Intermediaries will help you tailor your policy with AXA to cover your specific needs, with options to cover death, permanent total disability, accidental hospitalisation as well as critical illness. Their package can be specifically tailored to small and medium-sized businesses, who would find it more challenging to cushion the blow of the loss of an essential employee.
AIG
The tailored cover offered by AIG can cover death, terminal illness and critical illness, either through a life insurance policy or a life and critical illness policy. They offer flexible packages which you can change during the policy term. AIG also offers a Best Doctors benefit, where they will provide the person insured with a second medical opinion, ensuring that the key person and their family can get the right diagnosis as well as the proper treatment and care.
LV=
LV= offer a range of business protection insurance policies, including key person protection. Their critical illness cover will also help employers pay the company sick pay in the event of the insured person being unable to work. Their multifaceted policy protects a company’s profits and debts, covering recruitment costs, loss of earnings during the disruption of the business, penalties for late delivery of goods and services and paying back a business overdraft or repaying loans.
Their cover can also protect sole traders who are personally liable for any company debt, which would generally be inherited by their next of kin. You can also add critical illness cover to your policy, which covers 87 health conditions. If you’re unsure how much protection you need, they have a handy Key Person Cover calculator tool available on their website. LV= also offer a range of perks, such as LV= Business Care, providing free legal advice to small businesses and LV= Doctor Services for any life assured.
Legal & General
Two packages are available from Legal & General; a life cover policy or a life and critical illness cover policy. If you opt for the latter package, they will provide a payout in the event of the insured key person becoming diagnosed with a critical illness.
They deal with a vast amount of clients and have been known to pay out £247 million to 3600 individuals in one year, in critical illness and terminal illness cover claims. They also received the title of the UK’s Number One Term Assurance Provider according to a report in 2015.
Vitality
This provider is particularly suited for smaller businesses. Vitality’s cover aims to support smaller businesses who tend to be especially reliant on several essential employees or specialists. They can cover either an individual employee or several employees, and the sum insured can factor in the loss of profit, loan repayments, recruitment costs and more. The policy will cover both death and severe illnesses. You can get a quote on the phone or request a callback.
Aviva
The key person insurance offered by Aviva isn’t available directly to customers. You’ll instead have to go through an advisor or use a broker. They offer both life cover and life and critical illness cover, both of which include terminal illness cover. The beneficiary can use the payout to pay a company’s debts, replace key employees, protect its profits and provide support to a partner’s family. The policyholder can also choose whether to receive the cover amount in one lump sum or as annual payments. Aviva is an experienced insurance provider, which means they operate a smooth and straightforward claims process. Policyholders will also benefit from the advice and knowledge of a specialist team of financial and medical underwriters.
Royal London
Not only does this policy cover owners and managers as well as employees, but policyholders will benefit from Helping Hand, a support service providing recruitment and legal helplines following an incident. This service helps businesses deal with the aftermath of the diagnosis or death of a member of staff, beyond just financial support. This service offers a dedicated nurse through the policy, which can help the insured person and family during the period. The nurse is available to provide emotional support for the partner and children of a key person as well as complementary therapies to support recovery for certain conditions, such as speech and language therapy following a stroke.
Key person insurance through Royal London is only available through intermediaries. You can choose to add business loan protection to your cover, which will implement a plan to repay any loans following the loss of a key person. Other features of the cover include business value protection, which protects a company’s investments and profits.
LifeSearch (Broker)
LifeSearch is one of the UK’s leading Business Protection Advisers. They have a 4.9 out of 5 rating on Trustpilot and are the most awarded broker in the UK. With their policy, they offer free advice and quotes as well as flexible cover to suit any budget. Clients praise the excellent customer service provided by LifeSearch, and the broker’s size and reputation mean they have access to some of the most competitive prices on the market. Importantly, LifeSearch is independent, meaning they will offer impartial advice to find you a tailored product that suits your business.
Essential Insurance Group (Broker)
Another top-rated, award-winning insurance broker is Essential Insurance, rated 4.8 out of 5 on Feefo and awarded the Platinum Trusted Service Award in 2020 by Feefo, too. Essential Insurance can compare quotes from a variety of insurance providers across the UK and build you a policy which suits your company needs. If you go through Essential, you will have a dedicated personal advisor to offer you help and advice throughout your plan.
