Richard Branson, famed for his affinity for outlandish stunts, will soon be undertaking his most ambitious – and most dangerous – feat yet: flying into space.
The billionaire recently announced that in early 2015 he will board Virgin Galactic’s maiden flight into the final frontier.
Sir Richard’s interstellar adventure got us at PKB thinking: what would happen to Virgin without Richard Branson? What if the weather had taken a turn for the worst in his record-breaking hot air balloon flight over the Pacific Ocean? Or if his jump off the Palms Hotel Casino in Las Vegas had gone wrong?
All businesses have key people that they’d struggle to live without, whether it’s a top sales person or a technical expert. How would your business cope if they died or were no longer able to work?
What is key person protection?
Key person protection provides cover against the loss of people who are essential to the continued success of the business. Insurance policies will pay out if the key person dies or becomes critically ill or disabled.
Examples of key people include:
- A company director
- A key sales person with important contacts and business relationships
- A specialist with expertise that is critical to the success of the business
- Senior managers.
The loss of a key person can have major repercussions on a business. Depending on the person lost, these can include:
- Profit losses
- Disruption or loss of sales
- Fall in confidence by banks and suppliers
- Pressure build-up on staff to meet deadlines
- Declining morale among staff.
In the event of a business losing its key person, the insurer will provide the business with a lump sum to cover the costs of any losses incurred. These can include loss of profits or the cost of recruiting a replacement.
Under a set of rules known as the Anderson Rules, a business may be able to claim tax relief on insurance premiums if:
- the key person is a direct employee of the company
- the insurance is meant to cover the loss of profit following the loss of a key person
- it is an annual or short term insurance (no more than 5 years).
There is no specific tax legislation for key person protection so each claim is judged on a case-by-case basis.