A key man insurance payout is designed to protect your business from the financial fallout of losing someone vital. The lump sum can be used flexibly, but most companies put it towards:
Recruitment and training costs
Finding and onboarding a suitable replacement is rarely quick or cheap. Cover can fund headhunter fees, relocation, training, and the new hire’s salary during the handover.
Lost profits and reduced turnover
If a key person generates a significant share of the company’s revenue, their absence will likely cause a temporary dip in profits. The payout helps absorb that shortfall while the business stabilises.
Outstanding business loans and overdrafts
Lenders sometimes require a personal guarantee from a director. If that person passes away or becomes critically ill, the loan may need to be repaid quickly. Key person cover can settle the debt without draining cash flow.
Ongoing operational costs
Salaries, rent, supplier invoices, and contractual obligations don’t pause during a crisis. Cover keeps day-to-day operations running while leadership figures out the next move.
Contracts, clients, and reputation
Some contracts depend on a specific individual’s expertise or relationships. The payout can be used to retain clients, fulfil orders, or cover penalties for late or undelivered work.
Key Person Insurance: The Numbers
52% of UK businesses say they would cease trading within 12 months of losing a key person, according to research by Legal & General.
£19 million is paid out by UK protection insurers every working day, according to the ABI – supporting families and businesses through illness, injury, and bereavement.
96.9% of all individual protection claims were paid in 2024, one of the highest claim acceptance rates of any insurance product in the UK.
Sources: Association of British Insurers (ABI) Protection Claims data; Legal & General State of the Nation’s SMEs report. Figures correct at time of writing.
