1800 762 872

Key Person Insurance

When you are running your own business the most important asset to the business is you and any partners you may have. Make sure you future proof your family with life insurance or key person insurance.

What is key person insurance?

Key person insurance provides financial protection against lost revenue, profits and the capital value of your business should a key person suffer a major illness, injury or death.

The loss of a key person can affect the business in two main ways. It can:

  • Reduce the profitability of a business, and/or
  • Reduce the capital value of a business.

Who is a key person?

  • Company directors or partners
  • Project manager
  • A building surveyor or engineer
  • A sales director with valuable contacts
  • Construction site manager or foreman with strong expertise

How does it work?

The business takes out an insurance policy (e.g. life insurance, total and permanent disablement and trauma cover) on the key person.

What does it cover?

If a claim is made, the business receives funds to cover the expenses of replacing the key employee. When life insurance is taken out, this policy provides a lump sum payment that could help cover the following:

  • Payment of loans the key person had guaranteed
  • Protect business credit rating
  • Pay off shareholder loans
  • Protect against loss of major supplier
  • Recruiting costs
  • Training costs
  • Temporary replacement costs
  • Fall or reduction in sales, profits or revenue
  • Bad debts or receivables
  • Payment of loans the key person had guaranteed
  • Protect business credit rating
  • Pay off shareholder loans
  • Protect against loss of major supplier

How do you determining the amount of insurance cover?

How you calculate the worth a key person brings to a business can vary substantially. Much will depend on whether the person employee or whether they have a business ownership interest.

Information such as the remuneration package of the “key person”, the value of the business, the likely effect on business profitability as well as the costs of finding a replacement would all need to be considered to calculate the value of a key person to a business.

Remember to review

Over time the purpose of the insurance (i.e. either capital or revenue), and amounts required may also change, so it is important that the insurance is reviewed regularly, and any change documented. It is the purpose of the cover at the time of the last renewal which determines the tax treatment of the premium.

Contact us

Call us on 1800 633 467 and we will organise for our joint partner Aon Hewitt to call you to discuss your personal situation.

The information contained on this website is general in nature and should not be relied on as advice (personal or otherwise) because your personal needs, objectives and financial situation have not been considered. So before deciding whether a particular product is right for you, please consider the relevant Product Disclosure Statement or contact to speak to an adviser.

Financial advice services are provided by Aon Hewitt Financial Advice Limited ABN 13 091 225 642 AFSL no. 239183, a related body corporate of HIAIS and part of the Aon Group.


1800 633 467