What is Keyman Insurance?
Keyman Insurance, also known as Key Person Insurance, is a life insurance policy taken out by a business to cover the life of a key employee whose skills, knowledge, or leadership are crucial to the company's success. If the insured key person passes away or becomes permanently disabled, the business receives compensation to cover potential financial losses.
This type of insurance ensures business continuity and protects against financial instability due to the sudden loss of a critical team member.
60%
Of businesses fail after losing a key person
KES 10M+
Average financial impact of losing a key employee
6-12
Months to replace a key executive
What Does Keyman Insurance Cover?
| Coverage Type | Description |
|---|---|
| Death | Provides a lump sum payout to the business if the key person passes away. |
| Total & Permanent Disability | Covers loss of income if the key employee becomes permanently incapacitated. |
| Critical Illness (Optional) | Some policies cover serious illnesses that impact the employee's ability to work. |
| Business Loan Protection | Ensures repayment of business loans in case of the key person's loss. |
| Recruitment Costs | Helps cover the cost of hiring and training a replacement. |
Who Needs Keyman Insurance?
Business Owners & Founders
Their leadership and vision drive the company's success and direction.
CEOs & Senior Executives
Key decision-makers who manage operations and strategic direction.
Top Sales Executives
Individuals responsible for significant revenue generation and client relationships.
Technical Experts
Employees with unique technical skills or proprietary knowledge.
Financial Controllers
CFOs or accountants handling critical financial matters and investor relations.
Creative Directors
Individuals driving brand identity, marketing strategy, and creative direction.
Why is Keyman Insurance Important?
- Business Continuity – Provides financial support to the company in case of loss of a key person.
- Protects Against Revenue Loss – Covers lost profits due to the absence of a vital employee.
- Facilitates Recruitment & Training – Helps the business find and train a suitable replacement.
- Ensures Creditor & Investor Confidence – Reassures lenders and investors that the business can recover from the loss of a key leader.
- Smooth Succession Planning – Ensures a structured transition in leadership.
Business Survival
Studies show that up to 60% of businesses fail within 18 months of losing a key person. Keyman Insurance provides the financial cushion needed to navigate this critical period and ensure business survival.
How Keyman Insurance Works
- The Business Takes Out the Policy – The company identifies a key employee and buys an insurance policy on their life.
- The Business Pays the Premiums – The company is responsible for paying policy premiums.
- The Business is the Beneficiary – If the key person dies or becomes permanently disabled, the insurer pays the business a lump sum.
- The Payout Supports the Business – The funds help maintain operations, repay debts, or recruit a replacement.
Cost of Keyman Insurance in Kenya
The cost of Keyman Insurance depends on several factors:
Age & Health
- Younger, healthier individuals have lower premiums
- Medical examinations may be required
- Lifestyle factors affect pricing
Coverage Amount
- Higher sums assured lead to higher premiums
- Based on the key person's financial impact
- Typically 2-5 times annual salary
Business Factors
- Industry & business risk level
- Company financial stability
- Policy type (Term vs. Whole Life)
Why Choose Laren Insurance Agency?
- Specialized expertise in business insurance for Kenyan companies
- Comprehensive risk assessment and business continuity planning
- Access to multiple insurance providers for competitive pricing
- Quick and fair claims processing with dedicated specialists
- Understanding of industry-specific risks and regulatory requirements
- Customized coverage options for different business sizes and industries
- Ongoing policy review and risk management support
- Expert guidance on determining appropriate coverage amounts
Frequently Asked Questions
The appropriate coverage amount should reflect the financial impact of losing the key person. Consider factors like: annual salary and benefits, recruitment and training costs for a replacement, potential revenue loss during transition, outstanding business loans the person guaranteed, and the cost of hiring interim expertise. A common approach is to insure for 2-5 times the key person's annual compensation package.
Yes, businesses can insure multiple key employees under a single Keyman Insurance policy. This can be more cost-effective than individual policies and simplifies administration. Each insured person can have different coverage amounts based on their importance to the business. We can help structure a policy that covers your entire leadership team or multiple critical employees.
If the insured key person leaves the company voluntarily, the policy can typically be transferred to cover their replacement, or the coverage can be cancelled. Some policies may allow for a change of insured person without underwriting. It's important to review your policy terms and discuss succession planning with us to ensure continuous coverage for critical roles.
In Kenya, premiums for Keyman Insurance are generally tax-deductible as a business expense when the policy is intended to protect against business loss. The payout received by the business is typically tax-free. However, tax treatment can vary based on specific circumstances and policy structure. We recommend consulting with your tax advisor for guidance specific to your situation.
The process typically takes 2-6 weeks, depending on the complexity of the case and the underwriting requirements. Simple cases with younger, healthy key persons may be approved more quickly, while older individuals or those with medical conditions may require more extensive underwriting. We work to expedite the process while ensuring you get the right coverage for your business needs.
Ready to Protect Your Business?
Get comprehensive Keyman Insurance coverage tailored to protect your most valuable assets - your key people. Our experts will help you find the right protection at competitive rates.