Key Person Cover
Would your death or the death of a key team member mean the end of your business?
If a key person in your business is suddenly taken ill or has a serious accident, how will your business continue to grow?
Every business has key people who play a vital role, from those involved in day to day operations to those that determine strategic direction. If you were to lose a key person from your business the reality is that it could impact on the level of your business revenue, your ability to pay expenses, and your relationships with external suppliers and customers.
You and your key people face the risk of major illness, disablement and even death, which can have a serious impact on your business. By protecting yourself with insurance, and insuring key people, if you or they should die or become disabled, this protection can help your business to survive.
There are several options when looking for key person protection, including:
Business Life Cover - provides a lump sum payment to help minimise the financial impact on your business if you or a key team member dies or is diagnosed with a terminal illness. The insurance can provide vital assistance to help with ongoing business expenses and providing the essential time required to make good decisions about the future of your business.
A death in your team would be difficult enough to deal with but it could also impact heavily on the financial welfare of your business.
- Business Trauma Cover - provides a lump sum payment if you (or a key team member) are diagnosed for the first time with a covered serious medical condition. A person suffering from one of the four main critical illnesses (heart attack, heart disease, cancer or stroke) has a nearly 50% chance of surviving for up to 10 years beyond the critical incident. However, in many cases this involves a reduced working capacity.
The diagnosis of a serious illness is devastating in any circumstances but the burden will be far greater if the financial security of your business is also put at risk.
- Revenue Replacement Cover - provides essential revenue replacement to the business if a key person is disabled. Revenue Replacement Cover will pay your business an agreed monthly benefit for a set period if a key person is disabled because of a continuing sickness or injury.
Having a key person like a director or shareholder fall seriously ill or be seriously injured can have a devastating effect on a small to medium sized business where one or two people may be key revenue generators.
- Business Total & Permanent Disability Cover - provides a lump sum payment if you (or a key team member) are unable to work ever again because of a serious illness or injury. This benefit can be linked to a life insurance benefit or as a stand-alone plan and is very important because the key person hasn’t dead so there is no life insurance payment, but they cannot contribute to the business any more.
The financial impact of a key income earner becoming totally and permanently disabled and unable to work for the rest of their life can be significant. If this person is a business owner or key team member then the business could suffer if it doesn't receive financial support.
Who is a key person?
A key person is someone in the business responsible for generating business income – for example a sole trader, a key salesperson or a technical expert, as well as company directors and executives. It may also apply to an individual whose loss has a significant operational impact as opposed to business income, e.g. CEO, Financial Controller.
An Adelphi Insurance adviser can sit down with you and your business partners, in the comfort of your office or home, and develop your business's personalised Business Insurance Plan to determine the ideal of Key Person cover you need for your business’s unique circumstances and needs.
The diagram shows some of the risks associated with the loss of a Key Person
Food for thought...
- In 2008, it was estimated that 1,880 businesses ceased operation partly due to an injury to the owner or a key staff member. (1)
- 12.5% of adult males (15–65) have a disability that will keep them off work for six months or more. (2)
- 12.7% of adult females (15–65) have a disability that has kept them off work for six months or more. (2)
- 48% of succession plans held by family businesses in New Zealand do not cover unforeseen circumstances. (3)
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