A Key man insurance policy is purchased by a business to compensate business financial loss that would arise from the death, illness and disability of a key person i.e. Business owner, Shareholder, Director or Partner in the business. The company will receive a lump sum amount from the insurance company to ensure business continuity.
Most of cases the key person will be the business owner. In a big corporate company, the key person would be the different people who will be decided by the organization.
Who are all the key people in a business?
A highly skilled person in the business, who highly supports the growth of the company.
- Founder
- C.E.O
- Managing Director
- Partner
- C.F.O
- Key Project Manager
What Types Of Business Protection Or Business Insurance Are Available?
If you’re running a business in the UAE or outside of the country, be it a small-scale or big-scale business, a business protection plan will support the organization in many ways.
3 Types Of Business Protection Insurance Plans Are Available
1: Key man Insurance
A key man insurance can provide protection in the event of unexpected loss of a key person due to death, illness, or disability. In that situation, due to his death, the business profits will reduce, since the impact will directly affect the business. The Key man insurance policy is taken out by a business on a major key person in the company which will support the business. The key person is skilled and well experienced who really generates good profit for the business. This key man insurance policy can be assigned to banks as well.
Most of the time bank will require key man insurance policy to protect the credit facilities i.e. Banks offer credit facilities to companies for running business; meanwhile they will require additional security as assignment of insurance – key man insurance.
2: Shareholder protection
Shareholder protection policy is taken out by big corporations, in case any shareholder dies or is ill to purchase the shares from a co-shareholder, this will protect other shareholders in the company for smooth business continuity.
3: Partnership Protection
Partnership protection and Shareholder protection will be different, no shares are at stake in the business, and only business value is considered. There are different ways to structure partnership protection, so it is important to seek the best advice to ensure the abundant cover of any related documents is designed correctly.
How Much Key Man Insurance Cover Required?
It is most important to seek the best advice from financial planning in Dubai, there are different inputs taken into account while calculating the key man insurance cover, and different information taken into consideration like company profits, assets, liability, loans, and investment amount. So key man insurance policy will ensure business continuity.
What Will Be The Key Man Insurance Cost?
The cost of the key man insurance, ideally will be depending on different factors taken into account in the company, it varies from 0.5% to @2%, depending on the key person’s age and health,
| Risk without Key man Insurance and Best Possible Solution | ||
| Description | Business Impact | Solution |
| The Demise of a Key Person | Very High | Key man Insurance Policy |
| Loss of Business Owner | Extremely High | Business Protection Insurance |
| Loss of One Partner | Extremely High | Partnership Insurance |
| Goods damages | Medium | options available |
| Car Damage | Low | Replace |
Is Key Man Insurance Premium Exempted From Corporate Tax 2003?
Yes, the Keyman Insurance premium can be shown under expenses, since the policy is owned by the company and the premiums are paid by the company. However, the treatment may vary from country to country.
This is another advantage to the company.
| Advantages of Key man Insurance | Disadvantages of Keyman Insurance |
| Funding for future Business Continuity | Key man policy is not transferable |
| Clear any Bank Loans | |
| Pay any due to Suppliers | |
| Employees settlements | |
| Clear outstanding Liabilities | |
| Secure the business profits | |
| Protect the company, Goodwill | |
| Cover the recruitment costs | |
| Protect the Business Assets | |
| The insurance benefit amount is Tax-free | |
| Premiums can show under Expenses |
How Much Time Will It Take To Process The Key Man Insurance Policy Claim?
The key man Insurance policy claim can be processed from 10 days to 15 days.
Who Will Be The Beneficiary Of The Key Man Insurance Policy?
The beneficiary will be a company that paid the premiums for the key man policy.
To design the possible solution, it’s more important to arrange a meeting and understand the pros and cons of both business and Key Man Insurance policy.
What Are The Losses Covered By Key Man Insurance? In Case Death, Illness Or Disability Of Key Person
- Protects the business profits
- Safeguards the bank loans
- Pays off Business liabilities
- Outstanding debts
- Secures the goodwill of the company
- Recruitment of skilled people
- Protects the employees
- Safeguards the assets and liabilities
