Question 1

What is Keyman Insurance?

Accepted Answer

Keyman Insurance is a type of life insurance that a business takes out on a key employee or director whose death or critical illness would significantly impact the company's operations or profits. The business is the policyholder and receives the payout.

Question 2

What is the difference between "Keyman" and "KeyPerson Insurance"

Accepted Answer

There is no difference between Keyman Insurance and KeyPerson Insurance — they are two names for the same type of policy.

Keyman Insurance is the older, more traditional name for the cover. KeyPerson Insurance is the more modern Terminology.

Question 3

Who is considered a "key person"?

Accepted Answer

A key person is anyone crucial to the financial success or daily operation of the business. This could be:

A founder or director
Top salesperson or revenue generator
Lead engineer or product specialist
Any employee with unique skills or connections

Question 4

How does Keyman Insurance work?

Accepted Answer

The company:
Takes out a policy on a key employee.
Pays the monthly premiums.
Receives the lump sum payout if the insured key person dies or is diagnosed with a critical illness (if included on the policy).

The payout can help cover:
Temporary staffing costs
Recruitment and training of a replacement
Lost revenue
Repayment of business loans

Question 5

Can small businesses get Keyman Insurance?

Accepted Answer

Yes, absolutely. Small and medium-sized businesses (SMEs) often rely heavily on one or two individuals. Keyman cover provides crucial protection for continuity and peace of mind.

Question 6

How much cover do I need?

Accepted Answer

There’s no one-size-fits-all, the amount depends on:

The key person’s contribution to annual revenue
Their replacement cost
Outstanding loans tied to their presence
Business overheads and future risk

Your adviser will be able to recommend an appropriate level of cover for your business.

Question 7

Does it cover critical illness?

Accepted Answer

Yes, it can. Policies can include or offer Critical Illness Cover as an add-on. This means the company could receive a payout if the key person is diagnosed with a serious illness like cancer, heart attack, or stroke.

Question 8

How long does Keyman Insurance last?

Accepted Answer

Policies are usually term-based (e.g., 5–25 years), aligned with business needs or loan terms. You can renew or adjust the cover as needed and you are not "locked in", as you pay on a month to month basis.

Question 9

Which Insurance providers in the UK offer keyman insurance?

Accepted Answer

The Providers below all offer keyman insurance:

Legal & General
Aviva
Scottish Widows
Vitality Life
Royal London
Zurich
LV

Question 10

Can I cancel the policy if my keyperson leaves the business?

Accepted Answer

Yes, you can cancel your policy if your keyperson leaves the business.

Question 11

Is a medical exam required?

Accepted Answer

Often yes, especially for higher coverage. All policies are medically underwritten, so your health and lifestyle will be taken into consideration.

Question 12

When will Keyman Insurance pay out?

Accepted Answer

The insurer can pay out if:

The insured key person dies during the term of the policy.
The insured suffers a critical illness, if Critical Illness Cover is included.
The business has kept up with premiums and made full and honest disclosures when the policy was taken out.

Question 13

Why Keyman Insurance might not pay out?

Accepted Answer

A Keyman Insurance policy might not pay out if:

There was non-disclosure (e.g. undisclosed medical conditions or incorrect financial info).
The claim is made outside the policy term.
The condition isn’t covered on the policy (if it’s a Critical Illness claim).
The policy has exclusions or excludes specific causes of death (e.g. suicide in the first year).

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Keyman Insurance FAQ's