Why Key Person Insurance Could Save Your Business

Most business owners have insurance for their office, their equipment, even their company cars. But many overlook the one thing they can’t easily replace — their people.

That’s where Key Person Insurance comes in. And while it sounds like another box to tick, it could be the difference between your business surviving or shutting down when the unexpected happens.

The Real-World Example: A Tale of Two Businesses

Let’s imagine two businesses:

Company A: No Key Person Cover

Sarah is the co-founder of a fast-growing marketing agency. Her business partner James is the rainmaker — the one who brings in 70% of the clients. Sadly, James is diagnosed with a serious illness and can’t work for an extended period.

Within months:

• Client contracts are lost.

• Staff salaries still need to be paid.

• Loan repayments start piling up.

By the time Sarah finds a replacement, the agency is in serious financial trouble.

Company B: With Key Person Insurance

Now picture a similar agency, but this one has Key Person Insurance. When James falls ill, the business receives a payout. That money covers staff wages, buys time to bring in a new director, and keeps the bank and investors confident. The business weathers the storm and continues growing.

The difference? A single policy.

Why Key Person Insurance Is More Relevant Than Ever

Today’s businesses are more dependent on specialised knowledge, niche expertise, and strong client relationships than ever before. Losing one key person can cause:

• Revenue shock from losing clients.

• Cash flow pressure from ongoing overheads.

• Loss of investor confidence if leadership suddenly changes.

• Debt issues if loans were guaranteed by that individual.

And unlike insuring a building or vehicle, the cost of replacing a person’s contribution can’t be neatly calculated.

Who Should Think About It?

Key Person Insurance isn’t just for big corporations. It’s especially critical for:

• Professional firms (law, accounting, medical, engineering) reliant on partners.

• Small businesses with a founder who “does it all.”

• Start-ups where a few people hold the knowledge and client networks.

• Growth-stage companies seeking investment — investors often expect to see this cover in place.

Beyond Insurance: Business Continuity Planning

A good Key Person Insurance policy should be part of a broader risk strategy. Think about:

• Succession planning — who steps in if a director is gone?

• Client management — are relationships spread across the business, or concentrated with one person?

• Knowledge transfer — are processes documented, or locked in one person’s head?

Insurance gives you the financial runway, but planning gives you the structure.

Final Thought

Most business owners don’t like to think about “worst case scenarios.” But here’s the reality: ignoring the risk doesn’t make it go away.

Key Person Insurance is about buying time and protecting value. It gives your business breathing space to recover, regroup, and keep moving forward when the unexpected happens.

At Covermate Life, we’ve seen first-hand how critical this protection can be. It’s not just another policy — it’s business survival insurance. Get a quote