A key person is anyone within the company whose absence would make a critical difference to its continued success or survival. This is often the owner or directors but could also include key employees who have a pivotal role within the firm.

Not for the individual who is covered. This is because the policy is not benefiting the individual but the business who has put the policy in place. The premiums are usually a tax-deductible expense that can be put against the corporation tax bill. There is no requirement for the individual ‘key person’ to be taxed on this insurance as they will not receive any benefits.

Any business can take out key person insurance. It is effectively a life insurance product that can be taken out by a business and therefore can be purchased by every company from single owner operated firms, micro-businesses, small, medium, and large national and international firms.

Any pay-out from key person insurance is received by the business, not the individual covered. The pay-out benefits the business ‘wholly and exclusively’ and is therefore a tax-deductible expense that can be put against the corporation tax bill. There is no requirement for the individual ‘key person’ to be taxed on this insurance as they will not receive any benefits.

If you have a key person policy and the named individual leaves the business the plan will be cancelled. This is because the policy is set up with medical information on the named individual and cannot be transferred. A new policy can be set up, if required, for any new individual.

The key person insurance policy is taken out by the business and is therefore ‘owned’ by the business. The business also benefits from any pay-out.