Small partnerships often depend on one or two people for revenue, client relationships, or technical delivery. Key person cover helps the business survive a shock.
What the money is for
Payouts can fund recruitment, repay loans guaranteed by the individual, or bridge profits while clients are reassured. Agree the purpose in writing among partners.
Who owns the policy
Usually the business owns key person cover and is the beneficiary. Personal family cover remains separate so relatives are not negotiating with the firm for cash.
Partnership agreements first
Insurance without a partnership or members’ agreement still leaves ownership fights. Sequence legal documents, then policies.
Practical next steps
Treat this topic as a decision with paperwork attached. Write down the household facts that matter — who depends on income, which debts must clear, and which workplace benefits already exist — before you compare products. A clear brief stops glossy quotes from steering the plan.
When you speak to an insurer or adviser, ask for definitions and exclusions in writing, and keep PDFs of every illustration you rely on. Markets and underwriting change; your notes are the audit trail.
- Confirm what cover you already hold (personal and workplace).
- Size need against obligations, not round marketing numbers.
- Align wills, trusts, and nominations with the policy.
- Never cancel old cover until replacement is on risk.
Mistakes families make here
The common failure mode is optimising for the cheapest monthly figure while ignoring structure: joint versus single policies, accelerated versus additional benefits, and whether a trust exists at all. Another is letting group benefits create false confidence until a resignation removes them overnight.
Build a short annual review habit. An hour with schedules and nomination forms prevents most emergency weekends after a diagnosis or redundancy.
Review sums when revenue concentration changes.
Was this useful? Browse more in Work or subscribe for new guides.