Business InsuranceKey Person Insurance
Some businesses depend on one or two people more than they'd like to admit. Key person insurance protects the business itself if one of them is suddenly gone.
01What key person insurance is
Key person insurance gives a business financial protection against the loss of revenue or value caused by the death, disability or serious illness of someone whose skills, relationships or leadership are vital to it. A claim provides a cash injection that offsets the drop in revenue, or helps cover the business's debt obligations, while the business adjusts.
02Who counts as a key person?
Business owners & principals
Top billers / senior clinicians
Managing directors
High-profile team members
Financial controllers
Technical specialists
03Two reasons businesses take out this cover
Capital protection — preserving the value of the business, maintaining its credit standing, repaying loans or external debt, and protecting any personal guarantees tied to the key person.
Revenue protection — stabilising cash flow and profitability by covering the lost revenue the key person generated, along with recruitment, training and temporary staffing costs while a replacement is found.
Your accountant and adviser can help determine which purpose or combination applies, and the right level of cover: capital cover is often benchmarked against business valuation or loan amounts, while revenue cover is commonly set as a multiple of the key person's contribution to revenue.
04Ownership and tax treatment
A key person policy can be owned by the business itself, by the individual, or through an insurance trust each has different implications, particularly around tax. As a general guide, premiums for capital-purpose cover are typically not tax deductible and proceeds are generally not assessable on death (though CGT may apply to TPD or trauma proceeds); premiums for revenue-purpose cover are typically deductible, with proceeds treated as assessable income. Your accountant and adviser should confirm the right structure and documentation for your situation.
WHO COUNTS AS A KEY PERSONThe people your revenue actually depends on.
If losing them would materially damage revenue or delivery capacity, they are a key person.
Business owners & principals
Top billers / senior clinicians
Managing directors
Technical specialists
High-profile team members
Financial controllers
Cover amounts are usually set against revenue contribution or replacement cost.
Worth knowingIllustrative Example
A clinic's founding principal responsible for the majority of its revenue and long standing patient relationships is unexpectedly diagnosed with a serious illness and can no longer work. Patient bookings drop sharply, and the clinic struggles to find a replacement of the same caliber.
Why Covered LifeAdvice that actually fits your life
We are not a call centre. Every policy is structured around your circumstances, and we stay with you through to claim.
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Right-sized cover
We work through capital vs revenue purpose to land on a figure that actually protects the business.
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Structured properly
We help coordinate ownership and documentation with your accountant and lawyer.
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Built around your business
Practices, clinics and small businesses each carry different key person risk we tailor accordingly.
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Claims support
We help the business through the claims process at an already difficult time.
Why it mattersCover pays out, and pays out often
Life insurance in Australia is closely regulated and the claims genuinely get paid. These are the most recent admitted claim rates published by APRA and ASIC.
are admitted and paid
are admitted and paid
and paid
Also worth consideringCover that works alongside this
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01
Life Insurance
A lump sum for your family to clear debts and maintain their lifestyle if you pass away.
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02
TPD Insurance
A lump sum if illness or injury leaves you permanently unable to work.
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03
Income Protection
Ongoing monthly income if sickness or injury stops you from working.
Common questionsAnswers, without the confusion
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It varies — the business itself, the individual, or a dedicated insurance trust can each own the policy, with different tax and legal implications for each.
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This depends on whether the purpose is capital protection (business value, debt, guarantees) or revenue protection (lost income, recruitment costs) — often a combination of both.
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It depends on the purpose of the cover. Revenue-purpose premiums are typically deductible; capital-purpose premiums typically are not. Speak to your accountant for advice specific to your situation.
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Your accountant, your lawyer and your insurance adviser should all be involved to get the structure, valuation and documentation right.
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Yes — many businesses insure against death, TPD and trauma together, since all three can remove a key person from the business.
Still not sure? A short phone call usually clears it up faster than reading another page.
Ready when you areProtect the business, not just the person
Speak to our specialists today for a free, no-obligation quote.