Most businesses and other organisations have people whose departure could have a serious financial impact on the business. Naturally, this includes the business owners (see
Business insurance and succession planning).
Key people can include people such as:
- A controlling director who has personally guaranteed bank loans made to the firm.
- A sales director with extensive business contacts and influence.
- The technical director.
- A director who has recently been headhunted at considerable expense.
- The production director.
- A key designer.
Short term absences can usually be managed, and if the key person leaves, the business should be able to recruit a suitable replacement quickly. The real issue for many firms is what happens if the key person dies suddenly or cannot work for some weeks or months because of a serious illness or disability.
Key person insurance allows businesses to take out insurance against the financial consequences of losing a key person in this way. In other words, it is a type of business continuation insurance.
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Tax rules are subject to change. The FCA does not regulate tax advice.
