Life insurance for key employees

[FarmerPalmer]

I received an email from Contractor Financials about it this week, might be worth looking at:

I have no connection with them other than they sorted a mortgage out for me a while back.

[Andrew@Drewberry]

Life Insurance for Key Employees

Hi All

I saw this thread come up in my feed and I wanted to respond as there is a lot of confusion with regards to what is available. We have a lot of start-ups come through google to our sites asking these very questions.

I will try to explain the options available as succinctly as possible -

Group Life Insurance
For a group life insurance policy you need to have a minimum of 5 employees. Group life insurance is offered as an employee benefit with a level of cover which is often set as a multiple of salay i.e. 4 x Salary. Should a scheme member pass away the insurance company will pay the multiple of the employee's basic salary to their nominated beneficiaries, if the policy is structured correctly this will be tax free.

Relevant Life Insurance
For small companies it is often the case that they may only want to cover 1-2 employees. You can think of relevant life insurance as a group life insurance policy for 1 employee. The policy is owned and paid for by the employer however should the worst happen, any benefit will be paid to the employee's beneficiaries, again if the policy is structured correctly this will be tax free.

Key Man Insurance
Key man insurance is designed to protect the employer not the employee, it is designed to pay a lump sum to the business should the key employee pass away. It provides the business with a lump sum benefit to be used by the company however they see fit, the cash lump sum will often be used to cover the cost of an interim, recruitment and training costs or to replace lost profits. Key man insurance can also include Critical Illness Cover which means it will also pay out should the employee suffer one of the serious illnesses as defined by the insurers terms.

Executive Income Protection
Similar to relevant life insurance this is effectively a 1 person group income protection scheme. The policy is owned by the business and underwritten on the life of a particular employee, should the employee be unable to work due to any illness or injury (after the initial deferred period) the policy will pay a monthly benefit to the business of up to 80% of the employees gross earnings (...this can include Company Directors dividends). The benefit paid out to the employer can then be used however the business requires however it is most often used to cover the employee's sick pay entitlement.

If you have any queries let me know.

Andrew Jenkinson
Founder of Drewberry

<Admin note>Seems like good info to me. Link removed as per Ts and Cs - if you want to check them out just Google Drewberry</Admin note>

[Contreras]

I want my company to buy life insurance for some key employees (director, lead developer).
I'm still looking at various options, but I think that would typically sth paid personally to the family of the insured rather than company accounts.
I wonder if there is any problem with putting this through company expenses due to BIK etc?
Generally I want to add this as one more incentive to keep people with the company...

Executive Income Protection may be what you're looking for.

Apparently it's paid for by Co. but does not count as BiK, and pays out direct to the individual in respect of lost salary, dividends, NI contributions and even pension contributions.

Not looked into it myself - it was mentioned at a seminar by a qualified IFA, so there must be some truth to it . Google is your friend.

[ASB]

If the employee is the beneficiary its a BIK to them.

Edit there may be other ways of providing it which do not result in a BIK, e.g. if it is a death benefitfrom a pension might escape.

[northernladuk]

Is this what they want? Life pins in a small company isn't the best motivator in my opinion. A 'sales conference' in Greece or European city and the like would work much better. Sounds more like you are try to play the tax game rather than thinking of your employees.

[Sockpuppet]

I want my company to buy life insurance for some key employees (director, lead developer).
I'm still looking at various options, but I think that would typically sth paid personally to the family of the insured rather than company accounts.
I wonder if there is any problem with putting this through company expenses due to BIK etc?
Generally I want to add this as one more incentive to keep people with the company...

Do you actually have more than one member of staff and are any of them not in your family?

[yasockie]

I want my company to buy life insurance for some key employees (director, lead developer).
I'm still looking at various options, but I think that would typically sth paid personally to the family of the insured rather than company accounts.
I wonder if there is any problem with putting this through company expenses due to BIK etc?
Generally I want to add this as one more incentive to keep people with the company...