Key Person Insurance

Businesses sometimes recognise that their success is very dependent on the contribution of one or more ‘key people’. These people have a disproportionate effect on the profits of the company, either due to their fantastic business acumen or their specialist technical knowledge. In some cases their persona may embody the public image of the company and without them a company would have to reinvent itself.

In order to protect the value of that company (i.e. the value to shareholders, employees and even customers) in the event of death of such a person it is necessary to insure them. The aim is to provide working capital at a difficult time in order to get the company back in a financially strong position.

We need to ensure that the company would have sufficient funds to enable it to react quickly and decisively to avoid major short term and long term losses in the event of death or permanent disability of such a key person and these people should be insured accordingly, with the company being the beneficiary of any funds. In order to do this, the company needs to place a value on that person, to determine the funds that would be needed at such a time.

In many companies the nature of the work is specialised and requires an experienced knowledge of the marketplace or industry, therefore, the loss of certain individuals could have a fundamental effect on the whole of the company’s profit. It is necessary for the directors or partners of the company to arrive at an agreed sum which would be needed in such circumstances and this can be done with help from an experienced financial advisor, after discussions with the company accountant. A life policy for this amount is established.

The premiums can be offset against company tax in France and the UK.