Key Person Assurance is used for a broad range of primary aspects and objectives: the high cost and speed involved with the replacement of a key executive, disaster recovery, profit protection, making good on a contract (although often used for the redemption of bank debt), or share purchase (deceased shareholder) settlement ‘good leaver’.
For a contract to be legally valid, the law requires a clear financial insurable interest must exist between both parties at inception. This can only be demonstrated at the very point when risk is assumed - what I call ‘the eclipse’. Without insurable interest, the contract is not valid. The law moved towards this legal status, that of demonstrating financial Insurable Interest for many reasons, principally to stop crime and fraud.
How do we guarantee a valid contract for new deals? Financial insurable interest can only be timed during the completion meeting itself.
This is the very moment in time when executive (management) is appointed to NEWCO / BIDCO, and is empowered to sign under seal, and where service agreements are entered into, investment made by the investor, and where relevant debt provided by the bank. With bank accounts open (payment method), and documents signed, all the essential legal ingredients are in place to demonstrate financial insurable interest.
Premiums have, in real terms, reduced whilst, today, the scope and range of benefits and features have expanded beyond recognition with over 45 specified and critical illnesses (as defined by the Association of British Insurers). Previously, only three specified and critical illness benefits were offered: heart attack, stroke and cancer.
We offer the widest scope and range of benefits and features available:
- life assurance (benefits payable on death)
- terminal illness (benefit payable if diagnosed with less than 12 months to live)
- specified and critical illnesses (as defined by the Association of British Insurers), incorporating the essential Own Occupation Career Specific Total & Permanent Disability Benefit (benefit payable if executive is unable to continue specific duties / job). Statement Best Practice Specified and Critical Illness (attached).
Grantee (policy holder / owner) - we can issue one contract with as many as 20 separate Grantees (policy holders / owners). This can be very helpful if, for instance, there are a group of investors, funds or banks each having a need for their own security. The key essential aspect is we can deliver a total solution.
We can offer any combination of benefits and features:
- Standalone Life Assurance and Terminal Illness.
- Life Assurance, Terminal Illness with Own Occupation Total & Permanent Disability.
- Life Assurance, Terminal, Specified and Critical Illness including Own Occupation Career Specific Total & Permanent Disability Benefit.
Sums Assured can be offered on an equal basis, or split balance basis i.e. £2,000 000 Life Assurance & Terminal Illness and £1,000,000 Life Assurance, Terminal, Specified (ABI+), Critical Illness, Career Specific Own Occupation Total & Permanent Disability Benefit.
The preferred product provider
For advice in this area, we are whole of market. Our recommendations are based on over 37 years’ practice experience and market knowledge.
There are a number of significant factors we consider essential:
- Global geographical location and footprint of the executives.
- Number of ‘executive’ lives to be assured in the one company.
- Immediate Acceptance Cover Facility. How does this facility work? On the completion and submission of a clean proposal form (i.e. individual has no terminal, critical illnesses or adverse family history), the product provider will assume risk when instructed by us for a period of up to 60 days enabling the full underwriting process to be completed speedily whilst risk is assumed (mitigated) allowing the deal to complete without delay or risk.
- Adequate whole of market capacity for ‘critical illness’ (maximum sum assured able to underwrite on any one individual).
- The number of reassurance options.
- Scope and range of benefits and features must include all the Association of British Insurers definitions.
- Overall capability of extreme speed of delivery, underwriting and administration.
- Appetite for different risk types.
- Unfettered access to senior underwriters delivering intelligent, flexible, in-depth, quality underwriting decisions.
- The survival period. We only use product providers who do not stipulate a survival period for Specified and Critical Illness.
- Competitive premiums both pre and post underwriting.
- Claims experience.
Other material considerations are the life assured’s age, occupation, lifestyle and general state of health, country of residence, family history, countries commercially visited to fulfill their occupation, specific duties and industry sector.
These all influence our ultimate recommendation and confidence, enabling us to achieve the very best results and outcomes.