Key Person Cover
Key Person Cover provides financial protection for a business if a key employee or business owner dies, becomes seriously ill, or suffers a total and permanent disability, depending on the policy selected.
Every business has people whose knowledge, skills or relationships are critical to its success. A key person might be a business owner, director, top salesperson, specialist employee or anyone whose absence would have a significant financial impact on the business.
Key Person Cover is designed to help protect the business if that individual can no longer contribute due to death, serious illness or permanent disability. Depending on how the policy is structured, it can include Life Cover, Trauma Cover, Total and Permanent Disability (TPD) Cover or Income Protection.
If a valid claim is made, the business receives the insurance benefit. The funds can be used in whatever way best supports the business, such as replacing lost revenue, recruiting and training a replacement, covering ongoing operating expenses, repaying business debt or providing financial stability while the business adjusts.
The amount of cover required depends on the individual's contribution to the business and the potential financial impact of losing them. An adviser can help assess these risks and structure a policy that aligns with the needs of the business.
Why It Matters
The loss of a key person can affect more than day-to-day operations. It can impact revenue, client relationships, staff confidence and the long-term stability of the business. Key Person Cover helps provide the financial support needed to navigate this challenging period and maintain business continuity.
Common Misunderstandings
"Key Person Cover is only for business owners."
No. It can also insure employees whose knowledge, skills or relationships are essential to the success of the business.
"The benefit is paid to the employee or their family."
Generally, no. The business usually owns the policy and receives the benefit, depending on how the policy has been structured.
"It's only designed to replace lost profits."
No. The benefit can be used for a range of business purposes, including recruiting a replacement, covering expenses or supporting cash flow.
"Only large businesses need Key Person Cover."
Not at all. Small businesses are often more reliant on a small number of key individuals and may experience a greater financial impact if one of them is unable to work.
FAQs about Key Person Cover
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A key person is someone whose skills, experience or relationships are essential to the success and profitability of the business.
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Depending on the business's needs, it may include Life Cover, Trauma Cover, Total and Permanent Disability (TPD) Cover and Income Protection.
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In most cases, the business owns the policy and is the beneficiary of any claim payment, although ownership can vary depending on the intended purpose.
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The appropriate level of cover depends on the financial impact the loss of that individual would have on the business. An adviser can help assess this and recommend an appropriate amount.
Your people are often your business's greatest asset. If losing a key employee or business owner would have a significant financial impact, Key Person Cover can help protect your business and its future. Talk to a New Vision Financial Services adviser to discuss a solution that's tailored to your business, your team and your long-term goals.