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Key Person Cover

Key Person cover helps protect a business if an important employee dies. If they have taken out Critical Illness Cover they are covered if diagnosed with a critical illness.

The money from the policy is paid directly to the company or partners, helping them to protect their profits or clear business debt to continue trading as normally as possible.

What is a key person?

A key person is any member of staff who has a direct impact on the business’s profits, such as the business owner, director, salesperson or any employee with specialist skills or expertise.

Key features

Key Person Cover can help protect against the following business risks:

Protect profits

  1. Recruitment costs
  2. Loss of profits whilst the business is disrupted
  3. Paying penalties for non-delivery or late delivery on goods and services
  4. Paying any company sick pay to the key person if the claim is related to a critical illness

Protect debts

  1. Being unable to repay a loan
  2. Paying back a business overdraft
  3. Nervous suppliers may demand payment of an account upfront
  4. Covering owed salaries, dividends or loaned money through a director's loan account
  5. Key Person Cover can protect sole traders who are personally liable for business debt. If they died expectantly, any debt would be inherited by their next of kin

Critical Illness Cover

Our Key Person Cover can also include Critical Illness Cover which is one of the most comprehensive in the market. Key features of our Critical Illness Cover (this is available for standard cover only) include:

  • Pays a cash lump sum on death or one of the specified conditions during the term, and survives for at least 14 days
  • 87* conditions including 49 full payment, 38 additional payment conditions
  • Broader claim definitions so we can pay more claims or pay them quicker
  • Enhanced claim payments for 17 conditions
  • Flexible cover options

*20 of these additional payments are covered under 1 additional payment condition – ‘Less advanced cancers’

Important information for Critical Illness cover

  • Your client is covered for the conditions listed in the policy conditions and no others
  • If your client stops paying their premiums, they won't get any money back and their cover could stop
  • To make a critical illness claim, the person insured must survive for at least 14 days after being diagnosed
  • We won't pay a claim if your client dies as a result of intentionally taking their own life in the first 12 months of the policy

Our Enhanced children’s cover policy is not offered as an option on Business Protection Life and Critical Illness cover.

For more information please read the product profiles on Business Protection Life Insurance and Business Protection Combined Life and Critical Illness

Setting up cover

Setting up the cover depends on the legal structure of your client’s business. It should be set up to match the needs of different business types. Whether cover is set up as own life or life of another will depend on whether they’re a sole trader, a traditional or ordinary partnership, limited or limited Liability Company.

Find out more about these options in our adviser brochure.

Business type

Who should be insured

Benefits (separate policies should be set up to protect profits or clear debt)

How to set up the cover

Sole trader

Business owner or key member of staff

If the key person is an employee (not the business owner) the cash injection helps the company protect profits or clear existing debt.

Own life: the sole trader takes out the plan which is written in trust with their family/next of kin as the beneficiaries. If the sole trader dies, the money is paid to the beneficiaries (usually family or next of kin).

Life-of-another: sole traders can also take out Key Person Cover on an employee. The sole trader takes out the policy on a ‘life-of-another’ basis. Any claim is then paid directly to the sole trader.

Traditional or ordinary partnership

Partner or key member of staff

If one of the partners dies or has to take early retirement due to ill health, the remaining business owners would be responsible for any debt. Key Person Cover can be used to pay off the debt or keep the business operating.

If the key person is an employee (not the business owner) the cash injection helps the company protect profits or clear existing debt.

Own life: if the key person is a partner, the plan is on their own life, written in trust for all the partners. Any claim is then paid to the remaining business owners (through the trustees).

Life-of-another: if they key person is an employee, one of the partners takes out the policy on a ‘life-of-another’ basis, placed under trust for the benefit of all the partners.

Limited company

Shareholder, or key member of staff

The proceeds give the company a cash injection, which can be used to either:

  • protect profits
  • clear debt

Life-of-another: the company takes out the policy on a ‘life-of-another’. If a claim’s made, the money is paid directly to the company.

Limited liability partnership

Partner or key member of staff

How much cover to recommend

The amount of cover you recommend will depend on the individual circumstances of the business, but could include the following options:

  1. Multiple of profits (to protect business profit)
  2. Multiple of salary (to cover replacement/recruitment costs)
  3. Loan security (to pay off debt)
  4. Recruitment costs
  5. Business start-up

Use our Key Person Cover calculator as a guide for recommending cover.

Quote and apply supported by intelligent online underwriting and 10% LAUTRO uplift

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Business Protection options

Find out more about the type of businesses we cover and the policies available.

More on Business Protection options

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Tools and calculators

See all our business protection calculators available to simplify your client conversations.

View all tools and calculators

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Business Protection support

Our team will make sure that all your Business Protection applications are dealt with quickly and efficiently.

More on Business Protection support

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Why choose LV=

Your clients can access a range of resources and expert advice, as well as a number of value added services.

More on why to choose LV=

Liverpool Victoria Financial Services Limited, registered in England with registration number 12383237. County Gates, Bournemouth, BH1 2NF, UK