Ian Robinson, Independent Financial Planner, tells us about a client who had identified several of their senior employees as a ‘Key Person’ within the business.
He explains how the policy provided peace of mind that the business would be financially secure in the event of a loss of a key employee.
The case
Due to the specialised nature of the company, finding a replacement for our client’s key employees would have been difficult and, potentially, very costly. If any of them were to suffer a long-term illness, or even die, new candidates would have to be enticed away from rival firms with much higher salaries.
First, Ian spoke with the client to discuss their concerns. After analysing their options, our client found that the cost of providing Key Person Protection cover over a five-year period was more acceptable than the risk of self-insuring. Also, it was more cost-effective than the costs of finding replacements or budgeting for the loss of income.
During underwriting, it was found one of the key people had some health issues which increased the monthly premium. However, the client felt the cover was even more important because of this. Treating the increased premiums as an allowable business expense, they were able to provide an effective level of cover.
With Key Person Protection in place, our client can operate with the peace of mind that they are well-prepared for the potential financial damage that may have otherwise been caused following the death of a key employee.
Important information
The contents of this case study do not constitute financial advice. The tax treatment of protection policy premiums depends on your company’s circumstances. This has been prepared based on our current understanding of UK Law, Taxation and HMRC practice, all of which could be subject to change in future.
