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Why Keyperson Insurance Is Essential For Your Business Survival

4 Minute Read
Written by Kirk Cheesman
14 November 2019

The unexpected loss of a key person could seriously impact both short-term profits and long-term business survival. That’s why keyperson insurance is essential protection for the value you’ve worked so hard to build.

We’ve all heard it said that a business’s most valuable assets walk out the door every night. But, while every employee makes a valuable contribution to your business, the reality is that most businesses rely on just a few high performers and key decision-makers to win new business and deliver the high-quality service your customers expect.

What are the risks?

The costs can be substantial. A 2014 report from Oxford University Business College found that it costs more than £30,000 (around $61,500) to replace an average employee, including recruiting costs, lost output while the replacement gets up to speed, and time spent recruiting and training a new worker.[1]

And that’s just an average employee. The impact of losing a key person can be many times greater. One recent academic study found that a high performer delivers 400% more value than the average performer.[2] Which means that unless you protect yourself, the loss of a key person could potentially cost hundreds of thousands of dollars, severely affecting the performance of your business as a whole, and perhaps even putting your long-term survival in jeopardy.

That’s where Keyperson insurance comes in. Keyperson insurance protects your business from the financial impact of the death or permanent disability of an employee vital to your organisation, combining Life, Total and Permanent Disability (TPD) and Trauma cover in a single policy. The aim is to safeguard the value of vital business assets — the people who keep your business running from day to day.

“One recent academic study found that a high performer delivers 400% more value than the average performer.”

How it works

The essential difference between Keyperson insurance and standard Life cover is that on the death or disablement of the specified employee, it pays a benefit to the business, rather than the insured person or their family. That gives you the valuable funds to offset the impact of lost business and the costs of recruiting and training a suitable replacement.

In summary, Keyperson insurance helps to underpin profitability and business continuity when the unexpected happens.

For additional information, follow this link or speak to your General Broker.

[1] Oxford Economics, The Cost of Brain Drain, February 2014.

[2] O’Boyle and Aguinis, “The best and the rest: revisiting the norm of normality of individual performance”, Personnel Psychology, Vol 65, Issue 1, pp 79–119.

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