Keyperson protection - FAQs

1.????What is Key Person Protection?

Keyperson Protection is a life insurance taken out by a company for a key employee to protect itself against the loss it would suffer if a key person in their business died or were diagnosed with a critical illness during the term of the policy. This type of policy helps protect the company and mitigate against potential loss of profits or earnings should a keyperson die or become critically ill.

2.????Who is a Key Person?

A Keyperson is an employee of high importance that the company depends on for its success and whose death or critical illness would cause the company to suffer an immediate or potentially large financial loss. A key person is considered an individual whose skills, knowledge, experience or leadership is key to the ongoing success of the business.

3.????What does Key Person Insurance do? ?

In the event of the death of the keyperson, a lump sum will be paid out in the event of a keyperson passing away or becoming seriously ill to help cover any expenses or losses that are incurred by the company as a result. The policy is owned by the company and therefore the lump sum goes directly to the company. ?

4.????How much cover do I need? ?

This depends on a number of factors including what it is you need to use the lump sum for. Do you need to repay loans? Do you want it to buy you time so that you can find the right person to fill this keyperson’s role? You also need to consider what the estimated financial loss to your business would be in the event of the keyperson’s death or if they were to become critically ill.

5.????Who pays the premiums?

Key Person protection is a life insurance policy written on the life of the key person but is owned by the company. The business pays the premiums and therefore in the event of a death or critical illness of a key employee, the business will receive the lump sum from the insurance company.

6.????Are there other ways to protect my business?

There are a few other ways you can help protect your business including but not limited to;

1.?????Shareholders protection. Shareholder or Partnership Protection is a life insurance plan taken out on the life of each director or partner of a company. In the event of the life assured’s death, the life insurer will pay out a lump sum which can be used to buy back the deceased directors’ shareholding from their next of kin.

2.?????Executive Income Protection. If you take out an executive income protection policy for the company directors or key employees, the premiums can qualify as an allowable business expense which may be offset against the company’s corporation tax.

3.?????Executive pension. Setting up an executive pension can be very tax efficient for a company director. If you were to make employer contributions into an executive pension scheme, you would not have to pay income tax, employer’s PRSI and you may be able to offset these contributions against the company’s corporation tax.?