Key Person - Revenue Insurance
Welcome to Smart Private Wealth • Services • Business Insurance
Welcome to Smart Private Wealth • Services • Business Insurance
A key person is an individual whose continued association with a business provides that business with a significant and direct economic
gain. This may be the CEO, Founding Director, Director or similar senior position.
Economic gain means more than just profits. It can also include capital injections, cost efficiency, goodwill, access to credit and
contacts with suppliers and customers. Business owners will also usually be key people.
Key person insurance can compensate the business for the loss of a key person in two different ways: business profitability (revenue purpose) and the capital value of the business (capital purpose). If the business is highly reliant on a key person for generating income, then insurance for revenue purposes may be appropriate. This can be used to protect the business against any loss in revenue or increased costs that crop up as a result of losing the key person, such as the costs of recruiting and training a replacement for your key person.
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Costs to locate, recruit and train a full-time replacement. |
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Cost of a temporary replacement until a full-time replacement can be recruited, or temporary overtime costs. |
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Compensation for falls in revenue/sales/profit. |
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Compensation for bad debts resulting from the loss of a key person. |
A testamentary trust is commonly used by estate planning lawyers to protect the assets and inheritance of the testator’s benefciaries from creditors, family law actions and providing flexibility in relation to the distribution of the estate.
There are limits on how much you can pay into your super fund each financial year without having to pay extra tax. These limits are called ‘contribution caps’.
