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Key Person Income Protection
UK Business Cover
Key person income protection (also called key man income protection) pays your business if essential employees cannot work due to illness or injury
Compare key person income protection insurance information from specialist UK providers.
Monthly PaymentsIllness & InjuryOngoing CoverBusiness Protection
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Pre-Register for LaunchWhat is Key Person Income Protection?
Key person income protection is business insurance that provides regular monthly payments if a crucial employee, director, or owner cannot work due to illness or injury. Unlike life insurance which pays on death, this cover protects against long-term sickness. Under HMRC guidance (HMRC BIM45525), key person insurance premiums may be deductible as a trading expense when the policy protects against lost profits. According to the ABI, UK insurers paid a record £8bn in protection claims in 2024.
Replace Lost Revenue
Key person income protection provides monthly payments to cover the revenue your key employee would have generated. Keep cash flowing while they recover.
Cover Illness & Injury
Unlike life insurance, key person income protection cover pays out when the person is still alive but unable to work due to serious illness, accident, or injury.
Long-Term Security
Key person income protection insurance can pay benefits for years if needed, providing long-term security while you restructure or find a replacement.
Key Person Income Protection vs Life Insurance
Understanding the difference helps you choose the right key person protection for your business.
1Key Person Income Protection
- Pays monthly benefits if key person cannot work
- Covers illness, injury, and incapacity
- Payments continue until recovery or retirement
- Higher premiums due to more claims
2Key Person Life Insurance
- Pays a lump sum if key person dies
- Only covers death (not illness)
- One-time payment only
- Lower premiums than income protection
Best Practice: Many businesses combine both key person income protection and life insurance for comprehensive coverage against death AND long-term illness.
Key Person Income Protection Cost
Key person income protection costs more than life insurance due to higher claim rates. Here are typical premiums.
From
£50/month
£3,000/month Benefit
- 12-week deferred period
- Office-based occupation
- Age 30-40
MOST COMMON
From
£100/month
£5,000/month Benefit
- 8-week deferred period
- Most occupations
- Comprehensive cover
From
£200/month
£10,000/month Benefit
- 4-week deferred period
- High-value key person
- Maximum protection
Who Needs Key Person Income Protection?
Key person income protection is particularly valuable for these situations.
👨💼
Owner-Operators
Sole traders and small business owners who ARE the business
💼
Service Businesses
Consultancies, agencies, and professional services firms
🔧
Technical Experts
Businesses relying on specialist skills or knowledge
🤝
Client-Facing Roles
Key account managers with crucial client relationships
Key Person Income Protection FAQs
What is key person income protection?
Key person income protection is business insurance that pays monthly benefits if a key employee, director, or owner cannot work due to illness or injury. Unlike life insurance which pays a lump sum on death, income protection provides ongoing payments to replace lost revenue.
How is key person income protection different from life insurance?
Key person life insurance pays a lump sum if the key person dies. Key person income protection pays monthly benefits if they cannot work due to illness or injury. Income protection covers temporary or long-term incapacity while the person is still alive.
What is the deferred period?
The deferred period is how long you wait before key person income protection starts paying out. Common options are 4, 8, 13, or 26 weeks. Shorter deferred periods mean higher premiums but faster payouts.
Is key person income protection tax deductible?
Key person income protection premiums may be tax deductible as a business expense if the policy is solely for business benefit. The benefits received would typically be taxable as trading income. Consult a tax advisor for your specific situation.
Trusted Sources
This guide references: HMRC BIM45525 (tax treatment of key person premiums), HMRC EIM21820 (group income protection tax treatment — premiums deductible, payouts taxable via PAYE), ABI Claims Data 2024 (£8bn in protection claims; Aviva paid £61.8m in IP claims alone), Wiltshire Friendly (group IP tax deductibility guide), GRiD (group risk industry body), Aviva Claims Report 2025, FCA Insurance Guidance, and MoneyHelper.
Protect Against Long-Term Illness
Don't rely on life insurance alone. Compare key person income protection information from UK providers.
Calculate your cover • Compare providers • Critical illness cover