Life Insurance and the Law. A layman's introduction.

Summary
Keyman insurance is a necessary cost of a small business but it is often missed. The author explains why such an omission could be disastrous to your business

Keyman Insurance – insures some of your biggest business risks.

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Life Insurance News

As a businessman you might have public liability insurance and you insure your buildings, stock and vehicles. You may even have professional indemnity insurance and legal cost insurance. Is that all? What about your other primary assets – your key staff?

Key staff represent the heart of every businesses but no more so than the UK's 3.9 million small, often family, businesses that have up to 4 employees. Prolonged absence through serious illness or even death can be terminal for some of these enterprises. The risks are the same for limited companies, a partnerships and sole traders.

In this context Keyman Insurance is a must. Keyman Insurance represents a group of insurance plans all designed to financially protect business from the affects of prolonged illness or even death of staff who are central to the prosperity of the business. The insurance can't replace people but it can provide cash to buy time and cover the costs of temporary staff, recruitment, loss of profits or provide a cash injection.

The insurance falls into four categories – insurance to help your business recover during the extended period when your key personnel are unable to work or to train or recruit a replacement, insurance to protect profits, insurance to protect shareholders or partnership interests, and insurance for anyone involved in guaranteeing businesses loans or banking facilities.

Keyman Insurance on those who are central to your business.

Who are your key people? They are the ones who steer, create and drive your business. The people without whom your business would lose sales and profits or without whom the basic viability of your business would be shaken. Look at the Directors, Partners, owners and beyond. Consider the roles of senior managers in sales, technical development and operations – the roles will change in every business but the candidates are sure to jump out at you.

Insuring these people will provide the extra cash needed to take on temporary staff or recruit and train a replacement.

Keyman Insurance to protect your Profits.

The effect of losing key staff goes well beyond simply the cost of their salaries and the cost of replacement. As they're central to the businesses prosperity, their loss will knock on to the bottom line. You can insure for loss of profits too!

Keyman Insurance to protect Shareholders or Partners.

Here we are talking about insurance to protect interests in the event of long-term illness or death. Families may want to sell their stake in the business but the remaining members in the business may not want those stakes held by newcomers. Keyman insurance schemes can be implemented which provide the necessary finance to buy the shares from the original shareholders or their estate.

Keyman Insurance insuring those who provide personal guarantees.

When a business takes out a loan or raises bank finance the lender is quite likely to require a personal guarantee or a charge on their personal property. This especially applies to small and new businesses. So what happens if these guarantors become seriously ill or die? The lenders may well be in a position to call in the loan. What happens then? Again, Keyman Insurance is the answer. Insurance can be structured to pay-off the loan and thus free the business and the guarantor's family, from major worry.

Most of the UK's leading insurance companies offer Keyman Insurance as a development of their Life and Critical Illness Insurance interests. They have all the necessary paperwork available to implement the cover you need and ensure the taxman is kept at bay.

So, can your business afford to ignore Keyman Insurance? You'll be either a brave or foolish man to say NO!

Readers please note : You should undertake your own background checks before taking any action on any aspect mentioned in this article. Where the author has mentioned specific product details or given examples of how companies have reacted to specific situations, these should be correct as far as the author is aware when this article was written. In some cases additional background information not mentioned in the article has been used in obtaining the examples. Some examples or quotes may have been taken from information available in the public domain where all the background details may not be available. Insurers do change policy conditions and underwriting approach. They will view each situation on its own merits.

You should be aware that details of the topics written about within the articles can change. Therefore, always check out the current position before taking any action. You should also check that any action you are considering, or any proposed purchase, is suitable for your personal circumstances.