Smaller businesses rely on a few key people and should one of these key people die or become disabled, the business could be seriously affected.
Keyman insurance, pays out money to the business should an insured person die or suffer from some form of critical illness (depending on the type of cover bought). These proceeds can be used as the company sees fit. It doesn't have to be used to recruit and train a replacement for the insured person. It could be used to ensure that the spouse of the deceased is financially secure. Keyman insurance can also help privately owned companies to cover major shareholders. Should a major shareholder suddenly die or become disabled there is a possibility that the other directors could lose control of the company. This type of cover is called shareholder protection assurance and protects the other shareholders as the payout allows them to buy the equity that is in question. This kind of cover can also apply to partnerships, in that should one half of a partnership die or suffer sudden disability, the other partner will receive a payout to enable them to buy the equity.
As you can see, keyman insurance may be used to cover many needs, including employee replacement, investment, loan or mortgage protection, management buyout outs and other business protection needs.
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