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What exactly is a Keyman?
Basically a Key Man is any valuable member of your company who, should they pass away or suffer from a critical illness then this will result in financial losses for the company. The most common types of a Keyman are: Company directors, Shareholders, CEO’s, Chairman, Top salesman, IT development manger.
Should we purchase our keyman insurance from our bank?
Whilst many companies will go straight to their bank for keyman insurance or shareholder protection you really should shop around and compare rates for yourself. We compare quotes from the whole of the UK market to help find you the best possible deals.
Your bank will only sell their own product(s) so it will be highly likely that you will not be getting the best deal and it may not be the most suitable policy for your company.
How can we use the cash should we make a claim?
This is dependent upon the policy which is as follows:
Ownership Protection - This is where the money must be used for the sole purpose of buying out the director or shareholder should they die or suffer from a critical illness outlined within the policy.
Keyman Insurance - Profit Protection - This is where your company is free to spend the payout on whatever it feels necessary such as staff recruitment, training or just to help absorb any drop in turnover whilst the business learns to readjust to its new circumstances.
Loan Protection - This is where the payout must be used to settle any loan obligations including a mortgage. Some companies with a business loan will have a guarantee so it is always wise to insure this keyperson against the loan should they die or become critically ill.
Can a partnership take out Keyman Insurance?
Yes, if you are wanting to protect a partnership then you will require Partnership Protection (Ownership Protection) which enables the remaining partner to buy out the other one should they die or become critically ill.
This prevents anyone who may be reckless or is not connected with the business from becoming a partner.
Can a sole trader take out Keyman Insurance?
Yes you can as you are deemed valuable to the company and should you pass away or become critically ill then your business will suffer financial loss.
Is Keyman Insurance jut the same as normal life and critical illness?
Whilst they are very similar, normal life insurance and critical illness cover are personal insurances where the insured person personally pays the premium and any claim paid will go to their chosen beneficiary such as their partner / family etc.
Keyman insurance is different in that the company pays the premiums and they receive the payout should a successful claim be made.
Because Keyman Insurance is usually taken out by small to medium businesses, the amount covered is usually higher than that of a personal insurance policy and can quite often run into the hundreds of thousands or even millions.
How long should a Keyman Insurance policy run for?
Well this is entirely down to your companies needs. The minimum is one year and you can re-asses your policy on a yearly basis as many companies will experience keypersons leaving / retiring and even recruiting new key persons.
If you take out a Keyman Insurance policy to cover a business loan then you will obviously want the policy to run for the same duration as the loan.
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