Prior Knowledge for investments and mortgages

Keyman Insurance

What is Keyman Insurance?

Keyman insurance is a policy which protects a business against financial loss. The benefits from the plan go straight to the company, which makes if different to standard life and Critical illness policies. As the financial implicatons are higher for businesses Keyman insurance policies normally provide higher levels of cover to reflect this.

Companies normally protect their properties, vehicles and stock but forget the Key people in the business who generate the profits.

Who are your Key People?

Key people in your business can be be directors, shareholders, partners, top sales people, basically anybody involved with a company whose death or long term illness would have an effect on company profits.

Why do i need Keyman Insurance?

As a business owner you may have given personal guarentees to your bank, should you die or suffer a major illness your estate would be protected by a Keyman Insurance plan.

Should you have partners or shareholders in a company, in the event of their death their families may wish to sell their share of the company, potentially to a third party unknown to the existing directors. A keyman insurance policy can provide shareholders and partners with the capital to purchase the deceaseds share of the business, therfore retaining control.

A top sales person has a major injury / accident and is not able to work. As a business owner the loss of a keyperson can have a major impact on profits. This loss can be protected by a keyman policy.

What options do Keyman insurance policies have?

Keyman insurance can protect in the event of death, critical illness as well as income protection. They can be held in trust or in the name of the company and can cover for different number of years to match the ages of the Key people insured.

What about tax?

Premiums paid for Keyman Insurance can be offset against corporation tax in certain circumstances, however it should be noted that these rules can change, so up to date advice at the point of enquiry is required. However when tax reflief is gained policy proceeds from the keyman policy will then potentially be liable to corporation tax. In addition the benefits will increase the value of share in the company making the value of the deceaseds estate higher.

If a business trust is used the policy benefits will be paid to the trustees not the company, meaning the liabilty to corpoation tax on benefits is removed, plus the premiums may fall within one of the Inheritance Tax exemptions.

Capital Gains Tax and income tax may be payable in certain instances of a claim on a keyman insurance, but this will be dependant on the individual situation.

To discover a keyman insurance solution that fits perfectly with your needs, contact us today.