Key man insurance is a UK term that correlates with what the United States would call directors and officers insurance. This type of insurance allows you to cover key members of your staff or management team, key members whose disability or death could cause harm to your company. Many large companies carry this type of insurance coverage but usually only cover directors, whereas few small or medium companies have it in place at all.
Most keyman insurance can be bought as a separate policy but is more frequently bought as a part of a complete business insurance package policy. These complete policies can be bought in the following packages:
- Small office insurance. This insurance policy covers office contents, computers, business interruption, employer's liability, public liability, money and portable equipment.
- Home office insurance. This policy is for professionals who work from home. It would be coverage suitable for accountants, legal firms, consultants, design engineers, technology careers and most other professional services. It would cover employer's liability, public liability, office contents cover and computers.
- Tradesmen and construction insurance. These policies cover the special needs for plumbers, decorators, electricians, builders, roofers, and most other trades.
- Hair and Beauty. This policy would cover employer's liability, public and products liability, legal defense costs, personal injury, stock cover, money insurance, and business interruption.
Most all of these insurance policies will allow you to add a key man policy where you can designate the key employees and business officers. If you are operating your business with a business loan, your banker may require that you carry key man or life insurance as a way for the bank to get its money back if you are incapacitated in some way. Sole proprietors generally don't carry key man policies, although partnerships usually do.
Another instance that a keyman policy might be warranted is if you employ one sales person who generates over 80 percent of your revenues. If that person were to become unable to fulfill their job responsibilities it might take some time to replace them. A key man plan would cover the difference in the revenue you would produce normally until the new person can get up to speed or the incapacitated employee can return to work.
It is never a good idea to skimp on insurance, no matter what type, when it comes to your business. One claim or loss can break you and you might take years to recover if at all. A good insurance agent or company can help you decide what is adequate coverage for your type of business.