A Key Person is someone whose absence would greatly affect the company. The loss of a key person in the business could have a severe impact on the company and the business could suffer financially. In fact, in most cases, the continued successful operation of a business depends on the key person. Hence, a key person is considered crucial to the business. Therefore, it is important to have a Key Person Cover.
A Key Person Cover protects the business against any loss of income caused by key staff members. This policy is a type of life assurance or life assurance and critical illness. It covers the life of a key person within your business. In addition, the employer owns and pays for the policy and the pay-out is payable to the employer. The business takes out a life insurance policy on staff members’ lives to protect any large profits they generate. It is also a contingency plan insuring the business against financial loss, because of a death or critical illness (if chosen) of a key person.
A Key Person Cover will pay a lump sum to help the business recover from loss of profit. Your company can use it to pay off debts. You can use it to cover the cost of finding and hiring a replacement. You can also use it to distribute money to investors and pay severance to employees.