Key Person Insurance Advice
Insure your business against the loss of key personnel like executives, partners, or technical experts.
THE MiQ DIFFERENCE
What Makes Us Leading Insurance Advisers?
Too many financial advisers recommend insurance policies solely based on the commissions they receive – not what’s best for your business.
But MiQ is different.
Our approach is holistic: a detailed analysis of your succession plan to see what level of cover is required.
We’re paid by commission – but our diverse APL means there’s no incentive for us to recommend a particular insurer.
And we have access to a network of specialists, such as accountants and solicitors, who can support your strategic objectives.
Protecting your business’s continuity starts right here, with us.
- Diverse APL to suit various needs
- Holistic analyses of how insurance policies impact your strategic objectives
- Collaboration with external professionals like accountants and solicitors
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Our Key Person Insurance Solutions
What We Do
Key Person Insurance
Key Person Insurance for Australian Businesses
Businesses are built on their people, and the unexpected loss of key personnel can have serious financial consequences.
Key person insurance (KPI) safeguards your organisation against that risk.
Under a KPI policy, you can insure critical stakeholders like senior executives or guarantors against death or serious health conditions through term life, TPD and/or trauma insurance.
If a covered event does occur, your business will receive a lump-sum benefit that you can use to cover new operating expenses, revenue decreases, or lost capital.
Talk to an MiQ adviser to make sure your business’s key person risk is mediated through the right cover.
Key Person Insurance
Protection Against Revenue and Capital Losses
Key person insurance can have three designated purposes:
- for revenue (such as lost income or increased costs)
- for capital (such as debt protection or loss of goodwill)
- for a combination of revenue and capital.
Because your policy’s purpose heavily affects both how benefits can be used and the tax treatment of benefits and premiums, getting specialist advice is critical.
That’s why your MiQ adviser doesn’t work in isolation.
Instead, we’ll coordinate with other relevant professionals, such as commercial solicitors and tax specialists, to ensure your KPI is implemented in a way that supports your long-term business goals.
Key Person Insurance
Classes of Key People
Key person insurance can help protect your business if one or more of these people die or become unable to work due to injury or illness.
Founders and Partners
Business Loan Guarantors
Senior Executives
High-Performing Sales Staff
Senior Technical Specialist
Child Trauma Insurance Advice
If your child experiences a serious injury or illness, child cover helps pay for things like medical treatment, professional care, and time off work.
Your Key Person Insurance Questions, Answered
FAQs
Key person insurance protects your business against the financial consequences of key personnel – such as partners, founders, or experienced technicians – dying or being unable to work due to injury or illness. It normally includes term life insurance, total and permanent disability (TPD) insurance, and/or trauma insurance. Unlike personal insurances, key person cover is paid for by, and paid out to, your business.
Key person insurance can be used to protect against losses to revenue, capital, or both. Revenue-purposed insurance helps offset operating expenses and losses to revenue, such as lost clients or the costs of finding a replacement for the key person in question. Capital-purposed cover, on the other hand, can pay for impacts to liabilities (such as personally guaranteed loans), decreases in goodwill or business valuations, and payments to the deceased person’s estate.
Yes, some key person insurance premiums are tax-deductible. If you have insurance with a revenue purpose, the premiums will generally be deductible. On the other hand, if you have insurance with a capital purpose, the premiums generally won’t be deductible.
If your business receives a benefit with a capital purpose, it generally won’t be subject to income tax. By contrast, benefits from policies with revenue purposes are classed as assessable income and are consequently subject to income tax.
A benefit from key person insurance with a capital purpose isn’t subject to income tax, but it could trigger a capital gains tax (CGT) event. Capital-purposed insurance and related ownership structures, such as business insurance trusts, need to be set up in the right way to avoid paying unnecessary tax.
Because CGT legislation is so complex, it’s important to get advice from multiple experts, such as your financial adviser, commercial solicitor, and tax specialist. That’s where MiQ can help. Our collaborative advice framework helps you navigate each different input, ensuring that every piece of advice aligns with your long-term business goals.
Always remember to thoroughly review the PDS of any policy that you’re thinking about purchasing. Your financial advisor can help you understand exactly what’s covered and can recommend policies from their product list that match your family’s needs and risk level.
Generally, sole traders can’t insure themselves as key people. A sole trader isn’t incorporated, which means there’s no corporate entity that can hold the policy.
A one-person company might be able to insure its owner as a key person, but only if the business was expected to pass to a relative or be sold upon that person’s death. If the business is expected to dissolve upon the owner’s death, then KPI probably wouldn’t be feasible, as per the tax ruling IT 2434, which states:
“A ‘key man’ is not seen to exist in a situation where the loss of an employee, such as the owner/manager of a ‘one man’ incorporated business, could be expected to result in the termination of the business.”
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