What is a key person?

A key person is anyone within the company whose absence would make a critical difference to its continued success or survival. This is often the owner or directors but could also include key employees who have a pivotal role within the firm.

Is key person insurance taxable?

Not for the individual who is covered. This is because the policy is not benefiting the individual but the business who has put the policy in place. The premiums are usually a tax-deductible expense that can be put against the corporation tax bill. There is no requirement for the individual ‘key person’ to be taxed on this insurance as they will not receive any benefits.

Who can take out key person insurance?

Any business can take out key person insurance. It is effectively a life insurance product that can be taken out by a business and, therefore, can be purchased by every company from single owner-operated firms, micro-businesses, small, medium, and large national and international firms.

Is key person insurance a business expense?

Any payout from key person insurance is received by the business, not the individual covered. The payout benefits the business ‘wholly and exclusively’ and is, therefore, a tax-deductible expense that can be put against the corporation tax bill. There is no requirement for the individual ‘key person’ to be taxed on this insurance as they will not receive any benefits.

What happens if the key person leaves the company mid-term?

If you have a key person policy and the named individual leaves the business, the plan will be cancelled. This is because the policy is set up with medical information on the named individual and cannot be transferred. A new policy can be set up, if required, for any new individual.

Who is the owner and who is the beneficiary on a key person policy?

The key person insurance policy is taken out by the business and is therefore ‘owned’ by the business. The business also benefits from any pay-out.

Key Person Insurance | Alan Boswell Group

Name: Key Person Insurance
Brand: Alan Boswell Group
Rating: 4.9 (1420 reviews)

Establishing who is a key person in an organisation depends on the business and how it is structured.

In the event of a claim, the proceeds are paid directly to the business, helping them to protect profits or reduce debts so they can continue to trade.

The Alan Boswell Group Difference

We aim to build long-term relationships between our clients and our independent financial advisers. We’ll take time to understand your business’ needs and search the market to tailor a key person insurance plan that suits you, at the best premium.

How our customers rate us

We've dealt with Alan Boswell Group for over 10 years and have always been very impressed by their efficiency.

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Key person insurance in detail

If a key person in your business was to die or be diagnosed with a serious illness, key person insurance can help by:

Protecting profits

For example, by covering recruitment costs and loss of profits due to the absence of the key person.

Protecting debts

For example, by covering business loans and overdrafts that are dependent on the key person being present.

Key points

The cover is taken out over a specified term, for example five or ten years, depending on how long the cover is required for. However, the cover usually won’t have a cash-in value, so if you stop paying your premiums the cover will cease.

The premium for the cover will depend on how old the person is, their health, the amount of cover required, and how long the cover is needed for.

The benefit from a key person insurance plan is usually a tax-free lump sum, paid to the business in the event of a claim.