Insurance World

If you own your own business, you’ll have insurance in place for your buildings, stock and vehicles, and you will be likely to have public liability insurance. You may also be insured for professional indemnity and legal costs – but have you considered insuring your most important assets – your key staff?

In the UK there are 3.9 million small, often family, businesses with up to four employees – if one of those key staff were to die or fall seriously ill, it could mean the end of the business, and this goes for limited companies, partnerships and sole traders.

If you are one of those people then you should seriously consider Keyman Insurance, and here’s why. Keyman Insurance financially protects businesses from the effects of serious illness or death of staff who are central to the success of the company. It does this by providing cash when you need it most, so you can cover loss of profits, inject more cash into the business, or take on temporary staff.

There are actually four different types of Keyman Insurance:

• to help your business recover during the time that your key person is away from work, or to train/take on somebody new;

• insurance against loss of profits;

• to provide protection for shareholders or partnership interests; and

• for people providing businesses loans or banking facilities.

1 Protecting your business if a key person is away from work

Your key people are the ones who are an essential driving force in your business - the people who if they were away from work for a long period, your business would suffer greatly. This could mean a reduction of sales and profits, or it could mean your business is shaken to the core. Look at the Directors, Partners, owners, think about your senior managers – every business is different but the key people will soon become apparent to you.

Insuring these people will ensure that if they are ill or die, you will have the cash you need to take on someone new, or train a replacement.

2 Keyman Insurance to insure against loss of profits

Losing key staff can have huge ramifications, if they are central to the success of the business then their loss could leave you facing bankruptcy. It’s a good idea to insure against this possibility.

3 Keyman Insurance for Shareholders or Partners

In this case, the insurance will protect the company if shareholders or partners become seriously ill or die. Families may want to sell their share in the company which leaves the remaining members open to newcomers entering the business. Keyman insurance schemes can be used to provide capital to purchase the shares from the original shareholders or their estate.

4 Keyman Insurance insuring Guarantors

Many small and new businesses are required to provide a personal guarantee or a charge on their personal property when they take out a loan. This especially applies to small and new businesses. If one of these guarantors becomes critically ill or dies, then the lenders may decide to recall the loan. Keyman Insurance can protect you by paying off the loan and taking all the pressure off the guarantor/guarantor’s estate.

Most of the UK’s top insurance companies offer Keyman Insurance as a natural progression from their Life and Critical Illness Insurance provisions. They can advise you further on what type of policy would be best for you.

So, the question is, can your business really afford NOT to have Keyman Insurance?

Term life insurance provides you with a more affordable opportunity to ensure you mortgage payments in the unfortunate event of your death. Even though they are offered for a limited time-period, but you can always match them up with your mortgage payment cycles of 10 or 20-year contracts. For the budget conscious, this definitely seems to be a smarter alternative for a low cost death benefit.
Insurance companies offer cheap term life insurance policies with different contract time periods, conversion credit during the first five years and transferable waiver of premium.
Affordable alternatives are available through comparison-shopping at various online insurance intermediaries’ websites. Other than being a cheaper option, term life insurance is better in other aspects when compared to a mortgage life insurance. There are much personalization options available for a term life insurance policy. The proceeds from a term life insurance go directly to the beneficiaries instead of the lender, so the money can be used by your dependents as desired which could be even to pay off other debts. Term life insurance also pays a death benefit. According to NAIC (National Association of Insurance Commissioners), the companies pay almost 90 cents to the dollar in benefits for term life insurance policies. Typically the whole life insurance will be 2 to 3 times costlier than a term life insurance.
Term life insurance offers the cheapest alternative to provide insurance coverage for your dependents. It has allowed individuals under budget-crunch situations to buy policies with larger payout amounts due to the limited term of the coverage. So, if you can renew your term life insurance regularly during your lifetime, you have actually found an affordable alternative to expensive whole life insurance.