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Key person insurance for construction, who and how
Key person insurance for construction companies helps the business stay steady, with money for lost profit, recruiting a replacement or an outstanding loan (Legal & General ↗).
It pays the business if someone it relies on passes away or, with critical illness cover, is seriously ill (Legal & General ↗).
In a building firm that might be the owner, the person who runs the jobs or the person who wins the work.
This guide applies what UK insurers and HMRC publish to construction businesses.
Every claim here is our summary of a named external source, linked beside it. Sources change: check the wording at the link before you rely on it.
Why construction companies need key person insurance
Royal London's own example is a construction one: a company tendering for a major project could lose the contract if its head engineer suddenly passed away (Royal London ↗).
LV= lists penalties for late or non-delivery among the risks its key person cover helps with (LV= ↗).
- Loss of profits
- Having to recruit or train a replacement
- Losing personal or business contacts the key person kept up
- Loss of goodwill, which can affect raising capital or attracting investors
- Customers and suppliers losing confidence in the business
- Outstanding loans
Summarised from Legal & General's list of what a payout could help with (Legal & General ↗).
Who to insure in a construction business
Legal & General says a key person could be anyone crucial to the day-to-day running of the company, such as a director, an employee or anyone whose skill, knowledge and experience affects revenue (Legal & General ↗).
Royal London adds that shareholding is not necessarily a good indicator: a non-shareholding employee could easily be key (Royal London ↗).
The test is financial: the business must be able to show it would lose profits in the person's absence (Legal & General ↗).
Map your people to the roles insurers name, and ask whether loans, sales or future plans depend on them (Legal & General ↗).
- Owner/founderCheck this role
- CEO
- Operations managerCheck this role
- IT manager
- Web developer
- Sales leadCheck this role
- Employees with lots of contactsCheck this role
- Exceptional talents
Legal & General's list of roles that are typically covered by key person insurance, quoted as it publishes it (Legal & General ↗). Anyone can be key if the business would lose profit without them.
Construction-specific considerations
Occupation. For life insurance, MoneyHelper lists occupation among the things that set the premium, and says a high-risk job might push premiums up (MoneyHelper ↗).
Describe the covered person's real duties, on site and off.
The ABI names failing to disclose existing medical conditions as a common reason claims are declined (ABI ↗).
Time off work, too. Legal & General sells key person life cover, cover with critical illness, and Key Person Income Protection (Legal & General ↗).
The last pays the business a monthly benefit while the covered employee cannot work through illness or injury (Legal & General ↗).
Contracts. If a contract or loan agreement names people the other side relies on, read what it requires: the wording decides, and your solicitor can tell you what it means.
Summarised from how Legal & General describes its own products; check each at its link.
Cover amounts for construction
No insurer publishes construction-specific amounts, and we do not estimate one.
The same methods apply as in any business: profit, earnings and loans.
Scottish Widows allows full business loan cover for up to 3 directors, owners or key persons (Scottish Widows ↗).
Royal London calls profit the main way to value a key person (Royal London ↗).
Legal & General routinely averages the last 2 years' profit (Legal & General ↗).
Cover can also be set at a loan the business would need to repay if the key person passed away (Legal & General ↗).
How the policy is set up and taxed
Who owns the policy depends on the legal form of the business, not the industry.
A company owns its own policy; a partnership in England, Wales or Northern Ireland cannot, so the cover sits in trust.
The table sets out what the insurers describe for each form.
Rows summarise how the insurers and HMRC describe each structure; check each at its link. Aviva says its business life policy is available to limited companies, LLPs, individual partners and sole traders (Aviva ↗).
Summarised from HMRC's Business Income Manual. Whether the sole-purpose condition is met is a question of fact (HMRC ↗); check your case with your accountant.
Claims, and how they pay
The ABI named two common reasons claims were declined: existing medical conditions not disclosed, and policy definitions not met (ABI ↗).
Full, accurate answers on the application deal with the first.
Check it for yourself
Every claim on this page is our summary of one of the documents listed here.
We last checked them against the live sources on 28 September 2026.
The documents are the authority, not this page.
Insurers and HMRC update them, so validate any figure or condition at its link before you rely on it.
- MoneyHelper: what is life insurance? ↗What sets the price of life insurance, including occupation
- Legal & General Key Person Income Protection ↗A monthly benefit while the key person cannot work
- Scottish Widows underwriting FAQs ↗What counts as remuneration, and loan cover
- Legal & General key person insurance ↗Who a key person is, the roles typically covered, what a payout helps with
- Royal London: companies, key person protection ↗Who is key, sizing methods, start-ups, venture capital and loans
- Royal London: partnerships, LLPs and sole traders ↗Who can own the plan, trusts, and tax for unincorporated businesses
- LV= key person cover ↗How cover is set up for each type of business
- Legal & General adviser guide ↗Earnings, profit and loan methods for sizing cover
- HMRC Business Income Manual, BIM45525 ↗The two conditions for deducting key person premiums
- HMRC Business Income Manual, BIM45560 ↗Sole traders and partners insuring themselves
- ABI protection claims 2024 ↗Claims paid, and the common reasons claims were declined
Construction key person cover, answered
Not financial advice. This page is general information. Before buying insurance, the FCA tells consumers to check the firm on its Firm Checker (FCA ↗). For free guidance, see MoneyHelper.