Protect Your Business’s Future with Keyman Insurance in Ireland

The payout from a Key Person Insurance policy provides essential capital to keep the business going, manage debts, and maintain operational integrity in the absence of the key individual.

Knowing that the business is insured with Key Person Insurance can be a significant factor in attracting top talent, as it reflects the company’s commitment to stability and security.

In Ireland, Keyperson insurance tax relief can make this insurance an even more attractive proposition. There are two options for how your company can receive relief: 

1. Your premiums may be deductible for Corporation Tax Relief, but your proceeds will be liable for tax, 

OR

1. Your premiums may not be deductible for Corporation Tax Relief, but your proceeds will not be liable for Corporation Tax.

For businesses that have secured loans or investments based on the talents of key individuals, Key Person Insurance can provide reassurance to investors and creditors about the stability of their investment.

When a company identifies a team member as ‘key’, they take out a Key Person Insurance policy on that person.

The company pays the premiums, and in return, they’re the beneficiary of the policy. 

This means if the unexpected happens, the company receives the insurance payout, not the individual or their family. Add security to your valued staff members by arranging Death in Service benefits for them as well.

It’s different for each Keyperson, as they all have unique contributions. You can calculate it in a number of ways:

• Estimation of loss of profits
• Multiple of salary over a number of years
• Assess the value of loans your Keyperson has personally guaranteed
• Estimate the Replacement Costs for your Keyperson, including loss of profits, recruitment, training, business disruption, etc

Your company will need to pass the appropriate Board Resolution, recording that the Directors agree to effect Key Person Insurance for one or more employees or Directors. 

Don’t forget that you have to tell the Keyperson/s that you’re taking out a policy on them, and the reasons why!

A separate application is completed for each Keyperson. Even if you have a couple, these aren’t joint or dual life policies. Your Keyperson will also need to complete some documentation. Underwriting might involve health checks and risk assessments of the Keyperson.

Once the policy is in place, the company pays regular Key Person Insurance premiums. These premiums are calculated based on the key person’s value to the company, their health, and the policy terms.

When the Underwriting team has reviewed your application, and assuming the application is accepted, your policy will be in force. 

If the key person passes away or becomes incapacitated, the company files a claim. After the claim is verified, the insurance company provides a lump sum payment. 

This payout can be used to cover lost profits, recruit and train a replacement, or fulfil any financial obligations.

The tax treatment of the premiums and the payout can vary. If your payout is likely to be liable for tax, work with your accountant, tax advisor, and financial advisor to ensure that this Corporation Tax liability is included in the cover amount.

Greenway Financial Advisors can provide personalised advice and support throughout the entire process, managing all the application paperwork to ensure that your level of business protection is right for your company.