Business protection
Keyman Insurance
Keyman (key person) insurance is a life insurance policy a company takes on the life of a person critical to its success, usually a founder, director or a specialist whose loss would hurt revenue, financing or continuity. The company pays the premium and is the beneficiary.
Key takeaways
- Keyman insurance is life cover a company buys on a person critical to the business; the company pays the premium and receives the payout.
- It exists to absorb the commercial shock of losing that person: lost profit, replacement hiring, lender and creditor confidence.
- It is a business asset, not personal family cover: the benefit belongs to the company, not the individual's dependants.
- Sum insured is sized against the person's contribution to profit, replacement cost and any loans that depend on them.
- Tax treatment of premiums and payouts follows current Income Tax rules and has changed over time; confirm the present position with your CA.
What it protects against
The sudden death or disablement of a key person can stall projects, spook lenders and cost the business its most important relationships. Keyman cover gives the company a cash sum to absorb that shock: to cover lost profit, recruit and train a replacement, reassure banks and creditors, or fund an orderly transition.
It is a business asset, not a personal one. The policy is owned by and paid out to the company, not the individual's family.
Who needs it
Founder-led companies where one person drives sales or product. Firms with debt whose lenders rely on a specific individual. Partnerships and SMEs where a single technical expert, rainmaker or relationship-holder is hard to replace. Startups whose valuation rests on a small founding team.
How it is sized and taxed
Cover is usually sized against the person's contribution to profit, the cost to replace them, and any loans their absence would put at risk. Tax treatment of premiums and payouts follows the current Income Tax rules and has changed over time, so confirm the present position with your CA before you structure it.
As independent advisors we compare term-based keyman structures across insurers and help you set a defensible sum insured rather than a round-number guess.
Frequently asked questions
Who owns a keyman policy?
The company owns the policy, pays the premium and receives the payout. It is a business protection tool, not personal life cover for the individual's family.
How much keyman cover should a business take?
It is usually based on the key person's contribution to profit, the cost and time to replace them, and any business loans that depend on them. We help you arrive at a defensible figure.
Is keyman insurance tax deductible?
Premium deductibility and payout treatment follow the current Income Tax rules and have changed over time. Confirm the present position with your chartered accountant before structuring the policy.
Related: Group Term Life · Term Life · Talk to an advisor