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Opinion

Key Person Insurance In Practice: Choosing A Policy Fit For You

We’ve spoken before about the impact that losing a critical member of the team has on your business, and how you can mitigate against this by investing in Key Person insurance. But that’s easier said than done.

Key Person insurance can prove costly if applied incorrectly, and scale-ups can tie themselves in knots trying to choose a cover that stays relevant to them. So, in this article, we explore the reality of implementing this type of policy, and explain how to maximise its effectiveness.

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How much does it cost?

It all depends on the individual you’re covering. Usually, the cost ranges from £10 to £150 per month, per person. But age, lifestyle and medical history all play a factor in the price.

Naturally, the price also takes into account how long you want the policy to run for (aka ‘the term’). If this makes the insurance too expensive, consider taking out Life cover. This typically ranges from £10 to £50 per month, per person.

It’s worth bearing in mind that if you want critical illness cover (to pay out in the event the individual is diagnosed with a life-threatening condition, like cancer), this is usually an add-on to life insurance. With Key Person insurance, it’s part and parcel.

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What questions will I be asked?

Different providers require different information. Choose an insurance partner like Capsule, and a qualified adviser will want to know more about your business. Specifically, we’ll investigate the future ambitions for the company, and how your key people fit into them.

As a scale-up, you often have a number of milestones you hope to achieve in quick succession. We’ll identify these milestones, then assess the team members who are vital to reaching them.

What are the standard timeframes?

Usually, scale-ups take Key Person cover out to secure investment or to deliver on the investment they’ve just received. As a result, policies are generally long term, ranging from 5-15 years depending on whether:

  1. You’ve been told by an investor to get it in place, so you’re covering an investment period (typically five years)
  2. You’re covering the period where your business is likely to rely on a key person (typically beyond five years)

Working with insurance experts who understand scale-ups makes a real difference here. A qualified broker will be able to recommend a policy that best fits your timeframes. Then you’re always covered, and you’ll never pay for a policy you don’t need.

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Where Capsule comes in

Up to 80% of high-growth businesses are either underinsured or insured on the wrong basis. This risks your organisation’s success, and compromises your ability to grow. That’s why we work to understand exactly what’s needed, and offer cover that’s watertight.

We apply this same approach to Key Person insurance. So, if there are people within your company who are essential to your success, get in touch. A member of our team will help you to protect against losing them.

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If you’re interested in how we can help or just want to introduce yourself, get in touch. We’re always happy to talk. Alternatively you can book a meeting with one of the team using the Capsule Calendar.

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Capsule Insurance Services Limited t/a Capsule are an Appointed Representative of James Hallam Limited who are authorised and regulated by the Financial Conduct Authority (FCA), under Firm Reference Number (FRN) 134435. Capsule's FRN is 948838. Registered in England and Wales company number: 13340821. Registered office is 48 Belle Vue Terrace, Malvern, England WR14 4QG.

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