Key man protection and shareholder protection are insurance policies taken out to protect a business against the financial difficulties incurred after losing a key employee to ill health or death.

Key man protection is designed to protect a business loan, shares and shareholders as well as the dip in productivity or slump in sales due to the loss of a top salesperson or managing director.

There are four categories of loss for which Key man protection can provide compensation:

Loss of income due to the extended period when a key man is unable to work, also to provide short-term replacement of personnel and, if necessary to finance the recruitment and training of a replacement.

Protecting profit margins e.g. offsetting lost sales revenue as well as losses incurred from the delay or cancellation of any projects that the key person was involved in, loss of specialist skills and/or knowledge.

Protecting shareholders or partnership interests, whereby existing shareholders or partners can purchase shareholdings or partnership interests.

Insuring those involved in guaranteeing businesses loans or banking services. The value of insurance cover equates to that of the value of the guarantee given by the key person in question.

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