If an owner, partner or key employee dies or becomes ill, the knock on impact this could have on the business can be huge. The immediate concern will be that the business can continue to operate until circumstances can revert back to where they were.
Key man in business
A key person or key man is defined as one or more individuals whose contribution to the company is central to the profitability, growth or running of the business and whose death or serious illness would place a financial strain upon, or lead to financial loss for the company. Generally speaking, key man policies are written on what is known as 'life of another' basis.
This means that in the event of the death or serious illness of a key person the proceeds of the policy are paid to the company. This means the company owns the key man insurance plan, would be responsible for paying the premiums and in turn receive the proceeds.
What LifeSearch will ask you
When you talk to a LifeSearch Business adviser about key man insurance, he or she will:
- establish who the key people are and how much of the profitability of the company is assigned to each person
- provide help and guidance with placing the key man insurance in trust
- regularly review your key man insurance plan to ensure it remains up-to-date.