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Benefits of Keyman Insurance

  • Receive a lump sum payment if the insured key person in the company passes away or gets diagnosed with a terminal illness.
  •  Premiums from as little as $27.72 a month**.
  • An unlimited amount of life cover, as long as it’s justified.
  • Worldwide cover, 24/7 Cover
  • You can apply if you are aged between 10 and 74 years old

Keyman Person Insurance

Key person insurance is when a business takes out a life insurance policy on a key person within a business. Generally the policy owner of the life insurance policy will be the business and the life insurance policy will insure the key person or an employee that is crucial to the business.

Essentially this means that the business will receive a lump sum payment if this key person passes away or is diagnosed with a terminal illness, the business can then use the funds to either find a replacement with their skills or they could use the proceeds to pay down debts that the key person may have been a guarantor for.

What is Keyman Insurance?

Keyman insurance provides protection to a business by the business taking out a life insurance, TPD or trauma insurance policy on a key person or critical employee to the business. Usually the business will be the policy owner and beneficiary of the policy should it pay out. The payment can then be used by the business to replace the lost revenue the employee usually generated or to find a replacement employee or if the employee is a guarantor, the funds may be used to pay down debts of the business.

It can help cover:

Policy Types Available

Revenue Protection

This type of cover protects against lost revenue as a result of a key person exiting the business if that person brings in significant revenue, as well as covering the wages or salary for hiring a replacement or the costs of searching for a replacement.

Capital Protection

Ensure your business has the necessary funds to pay out any outstanding business loans with Capital Protection insurance should a key person who acts as a guarantor to any business loans pass away. You may also want to make sure you cover any overdraft facilities.

Buy/Sell Insurance

Buy/Sell Insurance ensures the remaining business partners or shareholders have the funds to buy out a deceased, disabled or critically ill key employee’s shares or ownership interests should they need to exit the business.

Who should have a keyman insurance policy?

You may want to consider cover if your business has:

Business Loans

If a business has outstanding loans, they want to consider protecting themselves against a loan suddenly being called in if a guarantor is no longer able to continue working in the business.

Reliance on key staff

If you are a business which relies on the skills, knowledge and experience of a small number of key staff who are fundamental to the business, you may want to consider protecting your business if one of these people were suddenly unable to work in the business.

Sole Traders/Partnerships

Sole Traders or Partnerships who have substantial business valuations may also want to consider a keyman policy.

Advantages of Keyman Insurance

Which employees should be covered?

Generally employees who are owners, directors or senior executives, or those employees whose skills, knowledge and experience are invaluable to a company should be covered.

How much cover is required?

The amount of cover required will depend on a number of factors:

How is a keyman insurance policy structured?

Generally a keyman policy is owned by the business, with the key person listed as the insured and the business listed as the beneficiary. This means that the directors/owners of the business would also administer the policy on behalf of the business.

Keyman Insurance FAQ

  • What is a key man life insurance policy?

    When a business owns a life insurance policy on a key man, e.g. a director, shareholder or another person critical to the business. The life insurance policy serves to protect the business against the financial loss in the event of a key man’s death.
  • What is the purpose of a key person insurance policy?

    Key person insurance minimises financial risk associated with the untimely death of a key person in the business. The policy is taken out by the business to ensure its security. The lump sum payment received could then be used to replace lost revenue, or pay off debts.
  • What is the definition of a key person?

    A key person is a person essential to generating revenue or providing technical know-how or managing and overseeing activities of the business. The loss of a key person, due to death or illness, could negatively affect the ongoing operations of the business, for example delaying critical projects.
  • What is key employee life insurance?

    Key employee life insurance is a policy generally taken out on key personnel in the business. An employee who contributes substantially to the success of the business and without whom the business might struggle. The policy is owned by the business to protect its interests in case of the untimely key employee’s death.

**Based on a 30-year-old, non-smoking male Accountant, living in NSW, purchasing $1 million worth of Keyman Insurance cover as at 21 November 2019 (stepped premiums).

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