Key personcoverfigure
Key workerassuranceis necessaryto safe guard your company and most probably your families incomefrom the possibilityof death or series illness to a key worker. There are many forms of key workerindemnitysuch as key person cover, business insurance, shareholder insurance, relevant life insurance. Every company has a different need and therefore it is significantto speak to the correctpeople to get the greatestrecommendation. The main aim of key mancoveris to returnany loss of earning that might occurif a key worker was to die or be incapableto work due to illness. If this state of affairswere to arise the key personpolicy would pay the company a one off lump sum. It would be totallyup to the businesshow best they used that money. The more comon option is to either restorethe keyperson with short-termstaff together withcosts of training, or to subsidise the deficitof profit due to the lackof the key worker. This is a easykeyman cover, a popular policy to go along side this is a shareholder policy. Shareholder indemnityis put in place to cover the costs incurred when the businessbuys back a deceaseddirectors shares. For example. Say there were two mainshareholders in a company, both owning 50% each. If one of these directors were to stop working, his 50% of the company would be approvedonto his estate. If this were to happen, half the company would now be on the latedirectors wife posession (for example). This can result in a number of problems, firstly the wife may wish to become an active partner and would have a huge say in where the company is going, even though she may have no skillof being a director or indeed int he business itself. Or secondly, the wife may choose to sell the share to a third party, possibly at a reduced amount therefore decreasingthe over all company worthor even if sold at true market value, it would mean a third party director is on the board with a 50% say in the companies direction. All of these scenarios cause problems and are why 70% of companies that lose a key director, do not maintain the levels of profit witnessedbefore the deceaseand more often than not end up closing. With Shareholder protection, the company/surviving director has the first choice to buy the shares at a pre-agreed fee. The policy would pay out on the death and be equal or greater than the pre-agreed preice meaning the surviving director would become 100% owner with no financial change what so ever. This would eliminate any risk of shares being sold or unprincipled director becoming involved and would mean the company can look to return to profitabilty as soon as possible. There is also a life cover which is a tax efficient way for director to have life insurance where the company pay the premiums, the directors life is insured, and the beneficiray can be anyone other than the director. This saves paying your premium from your taxed income, and is off set against the companies profits and therefore lowers the corporation tax for the company. on averrage a relevant life policy is about 35% cheaper than a normal policy. All these products arfe very complex and need to be set up by a qualified and regulated adviser.
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