40 frequently asked questions about key person insurance in Australia
Key person insurance is a cover taken out by a business on the life or health of an employee, partner, or director whose loss would significantly disrupt the business. If that key person dies or becomes disabled, the policy pays a lump sum to the business to cover the financial impact: lost revenue, recruitment and training costs for a replacement, debt servicing if loans were tied to that person's involvement, or funding for a buy-sell arrangement. The cover is owned and paid for by the business rather than the individual.
The questions below cluster around how to size the cover (typically based on a multiple of profits, replacement cost, or debt exposure), the tax treatment of premiums and proceeds (which depends on whether the policy purpose is revenue protection, capital protection, or buy-sell funding — the rules differ and a tax adviser should be consulted), and the structural choices around bundling life and TPD components. Other common questions cover the difference between key person and buy-sell agreements, ownership structures, what happens if the key person leaves the business, and how insurers underwrite policies where the business is the owner.
Across the nine insurers on the IMFL panel — AIA, Zurich, TAL, OnePath, ClearView, NEOS, Encompass, Acenda, and Futura — appetite for business-owned cover varies, especially for higher sums insured. These FAQs are general information. For a factual comparison structured around your specific business, generate an indicative quote or book a call with an adviser who can also coordinate with your accountant.
Key person insurance is a business protection policy taken out by a company on the life of a key employee whose loss would significantly impact the bu...
A key person is someone whose knowledge, skills, experience, and leadership are crucial to your business's success and whose loss would result in sign...
The fundamental differences between key person insurance and personal life insurance relate to ownership, beneficiary, and purpose. Key person insuran...
Revenue purpose and capital purpose key person insurance serve distinctly different business needs with significantly different tax implications in Au...
No, key person insurance is not legally mandatory for Australian businesses - it is an optional form of business protection insurance that companies c...
Applying for key person insurance in Australia requires comprehensive documentation about both the business and the key person being insured. Business...
Business structure significantly impacts how key person insurance should be structured, owned, and taxed in Australia. For sole traders, the individua...
Yes, while traditional key person insurance is the most direct protection, Australian small businesses have several alternative or complementary risk ...
Both products are forms of business protection insurance, but they address different risks and are structured differently. Key person insurance protec...
Information about key person insurance — including this FAQ — is provided as general advice only. General advice means we share factual product inform...
The key person insurance claims process in Australia begins when a key person dies, becomes totally and permanently disabled, or suffers a trauma or c...
The permitted uses of key person insurance proceeds depend on how the policy was structured and documented for tax purposes. For revenue-purpose polic...
Key person insurance claim payout timelines in Australia vary significantly depending on the claim type and complexity. Death claims are typically the...
The tax deductibility of key person insurance premiums in Australia depends entirely on whether the policy is held for revenue or capital purposes, as...
Key person insurance premium costs in Australia are influenced by numerous factors, similar to personal life insurance underwriting. The key person's ...
When a key person's health deteriorates after a key person insurance policy is in force, the impact on premiums depends on the policy structure and wh...
Key person insurance premiums are paid entirely from business funds, not personal funds, because the policy is a business expense and business asset. ...
Key Person Insurance is most often viewed alongside the Small Business Capital Gains Tax (CGT) concessions when capital-purpose cover (loan protection...
Australian key person insurance policies typically offer several types of coverage to protect businesses comprehensively. The main coverage types incl...
Determining the appropriate coverage amount requires careful analysis of your business's financial exposure and the key person's value. There are seve...
Yes, many Australian insurers allow businesses to cover multiple key persons either on a single policy or through multiple separate policies, providin...
When a key person leaves the company voluntarily or through termination (other than death or disability), the key person insurance policy typically re...
Yes, many Australian banks and lenders increasingly require key person insurance as a condition for approving business loans, particularly for small t...
Key person insurance is an essential component of comprehensive business succession planning in Australia, providing crucial financial resources to fa...
Key person insurance coverage should be reviewed regularly to ensure it remains adequate and appropriate for your business needs. At minimum, conduct ...
Key person insurance for business partnerships serves dual purposes and requires careful structuring to protect both the business and the partners. In...
Generally, key person insurance in Australia is designed for permanent employees or business owners rather than temporary or contract workers, though ...
Key person insurance works alongside other business insurance policies as part of a comprehensive business protection strategy, with each type serving...
Key person insurance plays a significant but complex role in business valuation and sale processes in Australia. From a risk perspective, having key p...
For businesses with multiple equal partners who are all equally critical to operations, key person insurance requires comprehensive coverage with care...
Business expansion interstate within Australia typically doesn't affect existing key person insurance policies, as Australian insurers provide coverag...
Remote work and flexible work arrangements generally don't impact key person insurance coverage or premiums in Australia, as the insurance protects ag...
Key person trauma cover (also called Critical Illness cover when used in a business context) is generally written using the same trauma products that ...
A buy/sell agreement is a legally binding contract between business owners that determines what happens to a departing owner's share — through death, ...
Yes — protecting against business debts is one of the common use cases for key person insurance, sometimes called debt protection or loan protection c...
Key person insurance is held on the life (or disability) of a specific individual and is owned by the business. If the key person changes role, the co...
Yes — trauma cover (also called critical illness cover) can be included in a key person insurance package alongside life and TPD. Trauma pays a lump s...
For a sole-founder business, the calculation is more nuanced than for a multi-partner business because the founder's death or disability typically mea...
Key person insurance policies in Australia typically include several standard exclusions and limitations that businesses should understand. Common dea...
Pre-existing medical conditions significantly impact key person insurance applications and outcomes in Australia. When applying for coverage on a key ...