Key Person Insurance Brisbane | Protect Your Business
Arranged by Katarzyna Urbanik. Senior Risk Adviser with 20+ years experience
Your Dedicated Key Person Insurance Broker
Katarzyna Urbanik
Director of Morgan Insurance - Senior Risk Adviser - Life Insurance, Income Protection, Trauma, TPD, Key Person Insurances
EXPERIENCE
20+ years in the financial & insurance industry
LOCATION
Brisbane, servicing Australia Wide
QUALIFICATIONS
- Bachelor of Business
- Diploma of Financial Planning (RG146)
- Advanced Diploma Financial Services
- Tier 2 General insurance compliance
Understanding Key Person Insurance: What You Need to Know
What Is Key Person Insurance?
Keyman insurance is more commonly referred to as key person insurance and is an important policy for Australian companies. It gives a financial security by providing payments to the business in case a key member of staff or owner dies or is incapacitated thereby allowing the business to carry on even in difficult circumstances.
How do businesses determine the coverage amount?
Businesses determine the coverage amount for keyman insurance by assessing the financial impact of losing a key person’s salary and benefits, their contribution to revenue and profitability, the costs of recruiting and training a replacement, and any business debts they have guaranteed. By evaluating these factors and consulting with an insurance advisor, businesses can ensure they have adequate coverage to maintain financial stability if a key employee or owner is lost.
Do you need key person insurance? Find out in 60 seconds.
Why small and medium businesses need key person insurance most
Large corporations have departments, backups, and layered talent. SMEs do not. If you run a small or medium-sized business, the loss of a single person can be catastrophic in a way that a large organisation would simply absorb. Here is why key person insurance matters more for SMEs than almost any other type of business.
Revenue dependency
When one person drives most of your income
Many businesses rely heavily on one person to bring in clients, close deals, or maintain key relationships. Lose that person and your pipeline dries up immediately. Key person insurance provides the financial buffer to keep the business running while you rebuild what they brought in.
Operational disruption
Specialist knowledge that walks out the door
Certain employees carry specialised knowledge that cannot be immediately replaced. Construction methods, regulatory expertise, supplier relationships, technical systems. If they are gone, projects stall and operations grind to a halt. The payout buys you time to stabilise while you find and train a replacement.
Investor and lender reassurance
Protecting confidence in your business continuity
Investors want to know the business is not entirely tied to a single individual. Banks and lenders sometimes require key person coverage before approving business loans, particularly where a specific person is integral to the repayment plan or business performance. A policy provides that reassurance.
Loan and debt obligations
Business debts that don't pause when someone leaves
Business loans, equipment finance, and commercial leases continue regardless of what happens to the people running the business. If the person whose income or guarantee underpins those obligations is no longer there, key person insurance can cover those commitments while the business reorganises.
How does a key person insurance payout actually work?
The structure of the payout depends on the policy and what your business needs. A broker helps you determine the right structure based on your specific financial exposure and what the proceeds need to cover.
Lump sum payout
A one-off payment to cover immediate financial shocks. Typically used for lost revenue, emergency staffing costs, repaying urgent business debts, or stabilising cash flow while the business reorganises after losing a key person. Most commonly structured for death and total permanent disability events.
Income replacement
Some key person policies provide regular monthly payments rather than a lump sum, offsetting lost profit while the business recovers and finds a replacement. This structure suits businesses where the financial impact is gradual rather than immediate, such as a slow decline in revenue following the loss of a key relationship holder.
Recruitment and training costs
Finding and training a replacement for a key person is expensive and time-consuming. Executive search fees, agency costs, onboarding, and the period of reduced productivity while a new person gets up to speed all add up. Key person insurance proceeds can cover these costs directly, removing the financial pressure during the transition.
Who should you insure and when should you act?
Not every employee needs a key person policy. The question is whether their absence would create a material financial impact on your business. Here is how to identify who qualifies and what warning signs indicate your business needs this cover now.
Who to consider insuring
Red flags that mean you need cover now
Is key person insurance tax deductible in Australia?
Key Person FAQ's
In Australia, the tax deductibility of key person insurance premiums depends on the policy’s purpose: premiums are generally tax deductible if the insurance is for revenue protection (covering loss of income or profits due to the death or disability of a key person), but not deductible if the policy is for capital protection (covering capital losses like debt repayment or buying out a deceased partner’s share). For specific advice, please consult your accountant.
Here’s a comparison table highlighting the differences between key person insurance and traditional life insurance:
| Aspect | Key Person Insurance | Traditional Life Insurance |
|---|---|---|
| Purpose | Protects a business from financial loss due to the death of a key individual | Provides financial support to the insured person’s family or other beneficiaries |
| Policy Owner | The business | The individual or their family |
| Premium Payer | The business | The individual or their family |
| Beneficiary | The business | The insured person’s family or other designated beneficiaries |
| Use of Death Benefit | Covering expenses like hiring a replacement, paying off debts, or maintaining operations | Providing financial support to the family, covering personal debts, or other needs |
You don’t have to hire a solicitor to set up key person insurance. Usually, you can get this insurance through an insurance broker or directly from an insurance company. However, it might be helpful to talk to a solicitor or financial advisor to understand the legal and financial details, like tax issues or how it affects business agreements.
Take Jones Manufacturing Co., for instance. John Jones, the founder and CEO, was the driving force behind the company’s success. When John suddenly passed away from a stroke, the business faced major financial and operational hurdles. Thankfully, they had key person insurance. The payout helped cover lost profits and paid for hiring and training a new technical expert. It also provided funds for additional training for current employees, ensuring projects stayed on track and the company’s reputation remained intact.
