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Compare keyman insurance (also called key person insurance or key person protection) from leading UK providers in 2 minutes. Pay out a tax-efficient lump sum if a director, founder or essential employee dies, suffers a critical illness, or can no longer work — so the business keeps running, debts get covered, and revenue is protected.
Protect your business with tailored insurance solutions!
Keyman insurance (also called key person insurance or key person protection) is a UK life-and-illness policy owned and paid for by a business on the life of an essential person — usually a director, founder, top salesperson or technical lead. If that person dies or becomes critically ill, the business receives a tax-efficient lump sum to cover lost profit, recruitment, training and any debts personally guaranteed by them.
The principle is simple. Most UK SMEs have one or two people without whom revenue, supplier relationships, IP knowledge or funding facilities would collapse. Keyman insurance turns that person-shaped risk into a financial asset the business can rely on. Premiums are paid by the company; the policy is owned by the company; the payout goes to the company — not to the family of the insured, which is what life insurance does.
Keyman protection diagram — how the policy flows in 2026
Almost any UK SME with concentrated revenue, IP or relationships in one or two people benefits from keyman cover. The most common buyers in 2026 include:
The single most common buyer. Cover the founder/director whose absence would tank profit, lender confidence and supplier accounts.
Investors, VCs and BBB-backed lenders increasingly require keyman cover on technical co-founders before releasing funding.
Solicitors, accountants, consultants — where one rainmaker partner brings in 30%+ of fee income.
Cover the owner or estimator whose pricing knowledge and trade-account relationships keep the business solvent.
Head chef, restaurant manager or licensed-premises operator — whose departure would close the business overnight.
Cover the technical director or top sales engineer whose customer relationships hold the order book together.
Dental, vet and GP practices where one principal owns the patient relationships, the goodwill and the practice mortgage.
Cover top billers and account directors — the loss of one £600k-billing consultant can wipe out a quarter's revenue.
There's no single right answer, but UK insurers and underwriters recognise three approved methodologies. Most SMEs use one or a blend of them:
If a director has personally guaranteed business debt — an asset finance line, a Growth Guarantee Scheme loan, an MCA — add the outstanding balance on top of any of the above so the policy clears the PG on death.
In most cases, yes — HMRC allows premiums on a keyman policy to be treated as an allowable business expense provided the long-standing "Anderson rules" are met. The key conditions, summarised in HMRC's BIM45525 manual, are:
If those tests are met, premiums are usually a deductible business expense and the company saves Corporation Tax. The corollary is that the eventual payout becomes a trading receipt — HMRC tax it. If the rules aren't met (e.g. cover for a major shareholder), premiums aren't deductible — but the payout is then usually tax-free.
| Insured is… | Premiums deductible? | Payout taxed? |
|---|---|---|
| Employee, no major shareholding | Yes | Yes (trade receipt) |
| Director with >5% shareholding | No | No (capital) |
| Term assurance, <10 years | Likely yes | Likely yes |
| Whole-of-life / has surrender value | No | No |
Always confirm with your accountant. The Loans Hub introduces UK FCA-authorised providers; we don't give tax advice.
A common search is "key man insurance vs life insurance". They look similar on paper but solve different problems and pay different people. Here's the side-by-side:
Many UK SMEs run a combination — keyman cover for the business risk, relevant life for tax-efficient personal cover, and shareholder protection if there are multiple owners. See our full business insurance guide →
Keyman insurance is a UK term assurance policy taken out by a business on the life (and often the critical illness) of an essential employee, director or founder. The business pays the premiums, owns the policy, and receives the payout if the insured person dies or becomes seriously ill. It exists to keep the business trading after losing someone whose departure would damage revenue, debt-servicing or supplier relationships. Also called key person insurance or key person protection.
In most cases yes — HMRC allow premiums as a deductible business expense if the long-standing Anderson rules are met (BIM45525). The four conditions are: the policy is sole-purpose for the trade, the insured is an employee or director (not a substantial shareholder), the policy is short-term term-assurance, and there's no investment or surrender value. If premiums are deductible the payout is treated as a taxable trading receipt; if they're not, the payout is usually tax-free. Always confirm with your accountant.
UK underwriters use three accepted methods: (1) a multiple of salary — typically 5× to 10× annual remuneration; (2) a multiple of profit — typically 2× the gross profit attributable to the key person; or (3) cost-of-replacement plus 12–24 months of lost profit during onboarding. Add any business debt the key person has personally guaranteed (PGs) on top of the figure. Most SME directors land in the £250k–£2m range. Try our quick estimator above.
Personal life insurance is owned by the individual and pays the family. Keyman insurance is owned by the business and pays the business. They cover different risks: life insurance protects loved ones from financial hardship; keyman insurance protects a company from the commercial impact of losing an essential person. Many UK directors hold both, plus relevant life cover (a tax-efficient personal life policy paid for by the business) and shareholder protection.
Yes — most UK keyman policies offer optional critical illness cover (CIC) as a rider. CIC pays out on diagnosis of one of the insurer's specified illnesses (typically cancer, heart attack, stroke, MS, kidney failure, organ transplant). Roughly 60% of the keyman claims paid by UK insurers in 2024 were critical illness, not death — so CIC is usually the highest-value addition you can make.
For straightforward cases (under-50, non-smoker, in good health, cover under £500k) cover can be on risk in 24–72 hours. Higher sums assured, older lives, or any disclosed medical condition usually trigger underwriting requirements (a GP report, medical examination, or financial questionnaire) which extend the timeline to 4–8 weeks.
Not always — but many GGS-accredited lenders will recommend or require keyman cover when the loan size relies heavily on one director's continued involvement. The same applies to asset finance, commercial mortgages and merchant cash advances where personal guarantees are in place. The Loans Hub can help line both up at once.
Most UK businesses use a keyman payout to cover one or more of: (a) lost profit during the recruitment / onboarding gap, (b) recruitment and headhunter fees for a replacement, (c) outstanding business debts personally guaranteed by the insured, (d) cash-flow buffer to stabilise supplier payments and payroll, (e) consultant fees to bridge specialist knowledge while training a replacement.
The Loans Hub introduces UK FCA-authorised providers including Aviva, Legal & General, LV=, Royal London, Scottish Widows, Vitality and Zurich. We're independent, not tied to any single insurer, and we'll explain the key wording differences before you proceed.
Tell us about your business and the key person in two minutes — we'll come back with indicative premiums and cover wording from our panel of UK insurers. There's no obligation, no fee, and your details are never sold on.
Start my free keyman quote →Keyman insurance (also written as key man, key person insurance or key person protection) is a long-term insurance contract regulated by the FCA. The Loans Hub is an introducer to UK FCA-authorised insurers and intermediaries; we are not an insurer ourselves and don't provide tax or investment advice. Quotes are illustrative and subject to underwriting, your declared health and lifestyle, the term and sum assured selected, and individual insurer criteria.
Everything UK businesses need on keyman / key-person cover — what it is, what it costs, the tax treatment, and cover by business type.
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