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Keyman insurance is a great way of safeguarding your business, however, getting to know what it does and how it can benefit your business can be the hard part. The definition of Keyman cover is life assurance on a key person whom your business depends upon. Let’s look at what a keyman insurance policies cover and the advantages and disadvantages of this type of policy for your business.

The keyman breakdown

Keyman insurance policies will be set up in one of two ways. The first being to cover life assurance only, the second to cover life and critical illness. Both policies will compensate the business for any financial losses it would suffer as an effect of the death or serious illness of a key team member during the term of the policy. This type of insurance policy is designed to compensate your business, which could be the sole beneficiary in the event of a claim, against the severe impact of the loss of a key person. Key man insurance can cover any of the business’ financial areas that could hinder the flow of operations if not covered otherwise.

In order to retain a keyman policy, three basic eligibility requirements need to be met. Firstly, the ‘keyman’ should not have more than half of the business’s shares. Secondly, the number of shares of the keyman and his family have combined cannot be more than 70% of the business shares. Lastly, proof of the important role that the keyman plays in the business is required, to show why the business needs this type of cover.

The key to keeping covered

There are many advantages that come along with a keyman insurance policy, each one having its own varying effect on your business and employees. The first and possibly best advantage of keyman insurance is that, in the case of the death of a valued team member, your business is paid money to be able to cope with the loss and make sure that your business is protected against risk when it’s at its most vulnerable. The premium paid on keyman insurance will also be treated as business expenses, meaning your business could save up a lot of money under current tax law, a real benefit to any business.

Keyman insurance also protects the business’s valuation. If your business was to be put up for sale, prospective buyers are more likely to put a higher value on your business if they know that it has a monetary back-up to meet the cost of replacement of its top team. Keyman insurance is also a great way of keeping your business’s shares stable in case of the loss of a top member of your team. Investors are less likely to offload their shares because keyman insurance will help make up any financial losses through the insurance proceeds.

Thinking outside of the keyman insurance box, this insurance policy does businesses justice in more ways than just money. With this policy, the morale and loyalty of the key employee is boosted as it helps them to feel valued and protected. This sense of belonging increases productivity and helps to retain key employees to support your business growth into the future.

Keyman insurance policies can be very cost effective and could be one of the best investments your business will make, so it’s important to make sure that your policy is suited to your business’s needs. At Protectus Healthcare, we understand the importance of keeping your business safe and sound in the most unfortunate of times. Get in touch or go online to see how we can help find you a keyman insurance policy that keeps your top team covered.