The purpose of this cover is to protect the company against any potential losses in the event of a key person dying. The policy is taken out by the company and can be put in place to cover corporate borrowings, director’s loans to the company or a loss of profit that would arise when a key person with special skills or contacts gets critically ill or dies.
The quantity of cover is typically valued, based on the expertise, knowledge, experience and contacts that the key person may have or alternatively a loan may be in the name of the key person or on a multiple of profits of the company.
The policy is generally affected in the name of the company whereby the benefits are for the benefit of the company and not for the benefit of the individual’s estate.
