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What Is Keyman or Keyperson Insurance?

Keyperson Insurance is put in place to protect the company in the event of an unexpected death of one of its key staff. A keyperson may or may not be directors.

Keyperson insurance is purchased by the company on the ‘life’ of an employee whose key skills are regarded as integral to the success of the company. The employer of the keyperson(s) pays the policy premiums and will receive a lump sum in the event of the death of the keyperson insured.

Keyperson or Keyman Insurance is life cover that is put in place to protect the company in the event of an unexpected death of one of its key staff. The keyperson may or may not be a director. A keyperson is anyone who the company depends on for its continued success, relies on their specialised skills, reputation and contacts and whose death would have serious consequences for the company. Examples of a keyperson would include a Finance Manager, leading Sales person or HR Manager.

Keyperson insurance is purchased by the company on the ‘life’ of an employee whose key skills are regarded as integral to the success of the company. The employer of the keyperson(s) pays the policy premiums and will receive a lump sum in the event of the death of the keyperson insured.

The cost of losing a keyperson include:-

– Loss of Sales and profits

– Management disruption

– Loan (directors loans to company or guarantees which may have been given to the bank)

– Company disruption

Calculating the amount of cover required:-

There are several methods in determining the amount of cover required, the most common being through examining the ‘Replacement Cost’, ‘Contribution to Profits’ or ‘Loans’:

Replacement Cost

This method examines the financial and non-financial costs involved with replacing a key member of staff. The factors involved in calculating the replacement cost of an employee include:

– The loss of profitability

– Cost of recruitment

– Training a replacement

– Business disruption

The likelihood of an increase in salary, extra bonuses as well as the amount of time it will take for the replacement to handle their responsibilities are also factors that need to be taken into account.

Contribution to Profits

This approach takes into consideration the key persons contribution to net profits. The usefulness of this method depends on the position held by the keyperson. For example, sales records may help determine the estimate for a Sales Director.

Loans

If a company takes out a commercial loan, the lending institution may require a Keyperson policy to be taken out to cover this liability.

The life policy itself is a standard life policy and can be taken out for a lot less than you might think.

For more detail on the above product or to get a quote why not visit our website below.

Pol O Murchu is a leading Irish Financial Advisor, Insurance Broker and Mortgage Broker. His company Heritage Insurance Brokers [http://www.heritageinsurancebrokers.ie] provides clients with a range of Insurance and Financial Products to suit their every need. He specialises in Life Insurance [http://www.heritageinsurancebrokers.ie/insurance/life_insurance_term_assurance.html], Mortgage Protection, Pensions, Investments, Mortgages, Health Insurance and a range of both personal and business insurance products. To get more information on any of our products contact us today.

Article Source: http://EzineArticles.com/expert/Pol_O_Murchu/1265422

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