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What is Keyperson Insurance?
Keyperson Insurance is a policy taken out by businesses to cover individuals critical to its success. Their loss—through death or long-term illness—could significantly affect profitability.
It could be a charismatic director who attracts a lot of the top talent in that field, an employee with specialist technical knowledge of the systems or a top sales-person who is known for forging long-term and successful business relationships.
How is Keyperson Cover Arranged?
The business owns and funds the policy. In the event of a claim, the payout goes directly to the business, usually treated as profit to offset the financial impact of losing a key individual.
Taxation of Premiums and Proceeds
Premiums: Tax relief is generally unavailable if the insured owns more than 5% of the business.
Proceeds: If the cover is for profit protection, payouts are typically taxed as trading income at the corporation tax rate.
When arranging cover, we are happy liaising with your accountant to ensure you are fully aware of the likely tax treatment.
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