Key Person Insurance

Provides capital to businesses should a key person become ill, or die

Insure Key Personal

All businesses have key personal who are instrumental to its continued success. Should a key person become seriously ill, or die, the impact on a business can be catastrophic. A business can insure against such an event using a Key Person Insurance policy, or an Executive Income Protection policy, providing essential stability and continuity.

Key Person (life and/or critical illness) Insurance

Pays out a cash lump sum if a key person dies or is diagnosed with a critical illness that meets the insurer’s definition, or if the insured meets the insurer’s definition of terminal illness or total permanent disability.

The amount of cover, and the term over which the policy runs is chosen at outset.
There is the option to link the cover to inflation (RPI), or a set annual percentage.
Immediate acceptance is available, assuming good health.

Types of Key Person Insurance

Depending on the type of cover taken out, the plan might be right for your company if you want to:

  • Protect your business against loss of revenue if one of your key people is too ill to work or dies.
  • Make sure a loan is repaid if a key person dies or becomes critically ill.
  • Have ownership protection which will give the business stakeholder a cash sum to buy company shares or buy out a partner if one of them becomes critically ill or dies.

Executive Income Protection Insurance

An Executive Income Protection policy pays a business a monthly income should the insured person become ill or injured and unable to work.

The amount of cover, and the term over which the policy runs is chosen at outset.
Cover up to 80% of annual salary and dividends, including spouse’s dividends if appropriate.
Income benefit is paid until the insured is better, or the end of the policy.

Key benefits of Executive Income Protection

The policy is owned by the company; this means it pays the premiums and receives the benefits, should a claim be paid. There are various advantages to this…

  • The company pays the premiums; they are not taxed as a benefit in kind - which can offer huge savings, especially for a higher rate taxpayer.
  • The premiums will be treated as an allowable expense for the company in calculating its Corporation Tax liability.
  • Upon a claim, monthly benefits are paid tax free to the company. They become company assets and will be liable to corporation tax, just as revenue would be.

Tax Implications of Key Person Insurance

The key person

On the basis that the company is the owner, and the key person is simply the person covered, then there are no benefit in kind or other taxation implications. However, if the company subsequently chooses to pay out or distribute any of the proceeds to the person covered or their family, then there would be tax implications.

The company

There are two aspects to consider – paying the premiums and receiving the proceeds.

There’s no specific provision in the tax legislation that guarantees corporation tax relief for the company. Instead, principles for the tax treatment were set out back in 1944 by the then Chancellor of the Exchequer, Sir John Anderson. In answer to a parliamentary question, he made the following statement…

'Treatment for taxation purposes would depend upon the facts of the particular case and it rests with the assessing authorities and the Commissioners on appeal if necessary to determine the liability by reference to these facts. I am, however, advised that the general practice in dealing with insurances by employers on the lives of employees is to treat the premiums as admissible deductions, and any sums received under a plan as trading receipts if (i) the sole relationship is that of employer and employee; (ii) the insurance is intended to meet loss of profit resulting from the loss of services of the employee; and (iii) it's an annual or short term insurance.'

Use Ikap

Richard Plews – Richard, the business owner, understands the challenges associated with running a successful business.
Claims history – 100% of all client claims have been paid in full.
Experience – 80 years of collective experience.
Price – we guarantee to beat any like-for-like quote.
Immediate acceptance – Provided a clean bill of health, we guarantee to get our clients insured immediately/same day.
Independence – We work with all major UK insurance companies.
Underwriting – due to excellent relationships with the insurers’ head underwriters, we get speedy underwriting decisions.
Regulation – We are authorised and regulated by the Financial Conduct Authority (FCA).
Online capabilities – all business is conducted on line and over the phone; no need for wet signatures and paper application forms.