Key Person Keyman Insurance  
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Key Person Keyman Insurance Business Insurance

Welcome to RGIB’s Keyman Insurance Center – but, we prefer to call it Key-Person Insurance

Key Person Insurance is an important part of any Business Insurance Program

RGIB’s specialises in providing cutting edge business insurance products and services; and Key Person insurance is a product that requires particular expertise to ensure Stakeholders equity & interests are covered properly; - the stakes are too high to get this type of cover wrong.

In simplistic terms Key Person insurance can best be described as an insurance policy taken out by a business and/or it’s stakeholders to compensate that business and/or its stakeholders for financial losses that would arise as a result of the death or extended incapacity of a key person involved in the key operations of the business.

Key Person insurance provides a business and it’s stakeholders a high degree of certainty in uncertain times; including for such things as:-

  • meeting business expenses;
  • business succession planning;
  • certainty of equity value;
  • agreed funding to purchase the equity;
  • continuity of equity value for the surviving spouse;
  • funding of re-payments of any capital loans or personal guarantees in the event of a major illness, injury or death of a Key Person or business partner;
  • provides funds for recruitment & training of a suitably qualified replacement employee;
  • meeting requirements for bank business loans;
  • salary packaging benefits; [dependent on the persons own taxation affairs]

  • A key person might be a:-

  • business owner(s);
  • partner in the business;
  • partner of a professional practice;
  • chief executive officer of a corporation;
  • senior executive of a corporation;
  • key project manager;
  • senior management of a business;
  • infact; there is no legal definition of "key person" but, for insurance purposes a key person is generally someone in a business whose knowledge, work, or overall contribution is considered uniquely valuable to the company; ie,

    a legal practice’s Principal Partner who is the driving force behind the practice’s ongoing success; which, in the case of that person’s death or incapacity that prevented them from continuing in that role, would cause an material loss to the practice’s income and thus, its value – and also its ability to continue to thrive.

Essentially, there are two [2] ‘types of loss’ which can trigger a Key Person insurance claim; they being,

  • the death of the Key Person; and/or
  • the incapacity of the Key Person rendering them unable to work in the ‘key’ role insured.

Getting the Right Key Person Insurance Cover

Of course, every business and/or partnership is different and requires specific consideration to the interests of stakeholders prior to determining what type and level of cover is required; - this is fundamental to getting the right Key Person insurance policy.

As an indication, there are a variety of methods that can be used in selecting the right amount of Key Person insurance to have, including the:

  • ‘replacement cost method’ (what the cost is to replace the key person);
  • ‘contributions to earnings method’ (percentage of earnings to company revenue);
  • ‘multiples of income method’ (current salary multiplied to determine value);

Thus; it is not unusual for us to work with a client’s accountant to determine what valuation methodologies are the most appropriate for the particular client – every stakeholder’s equity and interests have to be considered.

RGIB specialises in providing Key Person Insurance services and can help arrange a valuation of the business and stakeholders equity [essential for forward planning of amounts to be covered] – as is having an ‘Option to Purchase Agreement’ in place which sets out the rights and obligations of stakeholders in the event of a claim.

For quick reference to a couple of important fundamentals such as Valuing a Business & Stakeholders Equity & Valuing an Employee please click on either of these links - or go to frequently asked questions button below.


For more information about Keyman Insurance FAQ's


  For a No Obligation - Free Insurance Quote you have a couple of choices:-

     Telephone us and speak directly with one of our experienced staff:
         
  Email us Quick & Brief Details and we will phone you at a time requested:  
         




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