JS Risks Consultancy Company Limited
君 商 保 險 經 紀 有 限 公 司
Key Person Insurance
要員保險
Key Person Insurance policy offers coverage taken by an employer for his employee's life. The employer pays premium as the policyholder, while the insured member is any employee regarded as a significant contributor to the business's successful functioning. In case of the insured member's death or incapability to act, the employer receives the sum insured which helps to deal with potential financial instability caused.
If Key Person Insurance is not in place, a company may be faced with:
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Loss of profit
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Loss of professional knowledge which affects its competence
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Loss of business network and company credibility
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Loss of clients to competitors
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High costs of recruiting and training new members
With Key Person Insurance in place, the company enjoys benefits including:
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Encouraging employees: Key Person Insurance is a way of showing how important the insured employee is to the business, which in turn boosts morale and makes them want to stay in the company longer.
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Back-up plan: the benefit paid by the Key Person Insurance policy allows the company time to hire new talent or appoint existing members as means of replacement.
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Tax benefits: the premiums that the employer pays are considered business expenses and thus are eligible for tax benefits that can be claimed against the company's income.
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Avoiding liabilities: in the case of any loans on the key person’s guarantee, the person's death or incapability to act would cause a substantial liability to the business, which a Key Person Insurance policy helps to avoid.
Case Study
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Mr. A's company has an experienced sales representative Ms. B. Mr. A purchases Key Person Insurance for Ms. B at 5 times the average net profit she brings. When Ms. B is unfortunately diagnosed with terminal cervical cancer, Mr. A receives the sum insured from his Key Person Insurance policy. Upon business income tax being reduced from the sum insured, he is then able to use the remainder to cover lost potential earnings by Ms. B and the costs of hiring and training Mr. C to replace her.