If your business depends on one or two people, their loss is a financial risk you can insure

Zero. That is what your buildings insurance pays out when your founder dies.

Business owners are diligent about the tangible things. The premises are insured. So are the stock, the equipment and the vans. Somebody has read the schedule and knows what the excess is.

Then the asset the whole thing actually rests on, the handful of people without whom it would struggle to function at all, is left completely uninsured. Not because anyone weighed it up and decided against. Because nobody raised it.

Key person cover treats the loss of a vital individual as what it is: a serious financial risk that can be planned for, rather than an unthinkable event nobody wants to say out loud in a meeting.

What a key person actually is

Someone whose knowledge, skills, relationships or sheer effort are central to the business earning money. An owner. A founder. The lead salesperson who carries every significant client relationship around in their own head. The technical expert who is the only person who genuinely understands the thing you sell.

In a large company almost nobody is truly irreplaceable. There is depth, there is process, and there is somebody one rung down who can step up by Wednesday.

In a small or owner managed business that is frequently not true, and everybody involved knows it is not true. One or two people hold the relationships, the specialist knowledge and the driving energy the whole enterprise sits on. Losing them suddenly, through death or serious illness, is not a disruption. It is a financial blow to the business itself.

What the loss would actually cost

It helps to be concrete here, because vague is how this stays unaddressed for years.

Revenue falls as their relationships, expertise or output disappear. Finding, recruiting and training a replacement costs real money, and that replacement may take a long time to reach the same effectiveness, if they ever do. There is a period of disruption in which the business struggles, loses customers, or cannot meet commitments it has already made. Lenders and suppliers, who watch these things far more closely than owners tend to expect, may lose confidence at exactly the wrong moment.

For a business heavily dependent on that person, the impact can be severe. Sometimes it is existential.

How the cover works

The business takes out and pays for a policy on the life, and often the serious illness, of the key individual. The business is the beneficiary. If that person dies or becomes seriously ill during the term, a sum is paid to the business.

The money does not replace the person. Nothing does. What it buys is time and resources: cover for the dip in revenue, funding for recruitment, the ability to manage a transition properly rather than in a panic, and enough room to get through the disruption still trading.

It converts a catastrophe that feels uninsurable into a financial event somebody has already prepared for.

Where it meets your personal cover

In owner managed businesses these two things are joined at the hip, because the owner is usually both the key person in the company and the breadwinner at home. One event hits the business and the family on the same afternoon.

So I would ask business owning clients to look at protection in the round. Personal cover to look after the family. Business cover to look after the enterprise. An owner who has arranged one and not the other has covered half the risk that a single event creates, which is a strange place to stop.

The principle underneath all of it is that a business’s most valuable assets are frequently nowhere near its balance sheet. Insuring the premises while leaving the irreplaceable individual uninsured protects the replaceable and neglects the vital.

A small aside, not entirely on topic. I am as prone to this as anyone. I will happily spend an evening comparing cover for a phone screen, a thing I could replace on a Saturday morning with no lasting consequence, and I suspect most of us would. There is something about physical objects that makes them feel insurable in a way people never quite do.

The business does not share that instinct. It just notices who stopped turning up.

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Please note that these plans do not have a cash-in value and will stop if payments to them cease.

This article is general information rather than personal or business financial advice. Key person cover carries specific tax and legal considerations, so please take professional advice on whether and how it fits your business.

Legacy Capital Management is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website at www.sjp.co.uk/products.

The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.

Legacy Capital Management, Rosewood House, Duffield Park, Stoke Poges, SL2 4HY

SJP Approved 28/07/2026