Key person income

Key Person Cover allows you to protect your business from the financial impact of losing a key employee (including owners/managers). In the event of a key person’s death, key person income protection covers the loss of earnings due to the key person’s absence.

What is key person income protection?

If a key employee becomes incapacitated and cannot work due to illness or injury, this protection product provides a regular monthly benefit to your business. The benefit allows your business to move confidently through financial uncertainty while the key person is incapacitated.

What can key person income protection be used for?

This protection product can be used by your business to meet the cost of hiring a temporary replacement employee, protect profits lost by your employees’ absence, or support any ongoing loan repayments.

Who is a key person?

A key person is an employee whose skill, knowledge, experience or leadership contributes to the continued financial success of the business. If such a person is lost, it may lead to financial instability or partial closure so that key person protection may help in this case.

What are the details?
  • Minimum cover: No minimum amount of cover. Driven by minimum premium.
  • Maximum cover: Up to £20,833 per month (£250,000 per year) for level cover, or £14,583 per month (£175,000 per year) at outset for increasing cover. The following applies:
    • Up to 2.5 times the key employee’s annual earnings to meet the cost of hiring a temporary replacement.
    • Up to 75% of the business’s gross profit which can be attributed to the contribution of the key employee.
    • The repayments and related interest of a business mortgage or loan which relates to the contribution of the key employee.
  • Limited Benefit Period: The benefit for any individual claim is limited to 12 or 24 months, depending on which option is chosen at outset.
  • Type of cover: Level and increasing cover available. Increasing cover increases in line with the changes in the Retail Prices Index up to a maximum of 10% of current monthly benefit and the premium increases in line with the change in the Retail Prices Index multiplied by 1.5 subject to a maximum increase of 15% per year. Only available as a single life plan.
  • Age Limits: This policy can be taken out from the employee’s 18th birthday up until their 60th birthday. The minimum length of the policy is five years and the maximum length of the policy is 20 years. The policy must end before their 70th birthday. There may be certain occupations that have limitations on the length of the policy.
  • Premiums: Payable monthly by Direct Debit.

What are the benefits and options?

Changing Your Policy (Also known as Guaranteed Insurability Option):

Can increase cover on certain specified events, without need for further medical evidence. Eligibility criteria and restrictions apply.

Other changes:

Your client can request to make other changes to their plan. A new policy may need to be set up.

Deferred Period:

Your client can choose from 4, 8, 13, 26 or 52 weeks.

Rehabilitation Support Service:

Automatically included at the point of claim, provides back to work support, for mental and physical health

Wellbeing Support:

Access to dedicated specialist nurses. This service is available from the day the policy starts and is provided by Red Arc Assured Limited.

Linked Claims:

Automatically included.

Proportionate Benefit:

Automatically included.

Waiver of Premium:

Can be included for an additional cost.


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