Note

Not to be confused with business loan or personal cover for a businessperson

Cover

• Life, TPD
• Sometimes IP, Business Expenses (special policy wording)
• 5- to 10-year duration

Purpose

• Compensates loss of profits
• Covers high replacement costs
• Compensates ongoing expenses

Beneficiary

Company

Insured

Key person: Mainly responsible for the success of the company, e.g. has special knowledge, ideas, contacts

Evidence

Depending on sum assured: 

• Application
• Financial questionnaire
• Explanation by the company why the applicant is considered a key person and how the sum assured has been calculated
• Independent third party information:
  • Proof of income: 
    • Income tax return
    • Salary slip
    • Confirmation by company
  • Financial statement confirmed by an independent third party incl. share

Income

Usually a 3-year average should be used. Be careful with trends, high deviations, and one-off payments.

Key person cover:

• Net profit before tax, share percentage
  or
• Basic gross salary

Calculation

Standard calculation:

• Life / TPD = Net profit before tax * 5
  or gross salary * 10
• IP / Business Expenses according to policy wording

Special consideration:

• In case there is more than one key person: What is their individual contribution to the profit? Their share in the business might give an indication.
• For applicants close to usual retirement age