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Key person insurance for professional services, fee earner by fee earner
Key person insurance for professional services firms helps the firm stay steady, with money for lost profit, recruiting a replacement or an outstanding loan (Legal & General ↗).
It pays the firm, or its partners, if someone it relies on passes away or, with critical illness cover, is seriously ill (LV= ↗).
For solicitors, accountants and consultancies, the people who hold the client relationships are often the ones to look at first.
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 professional services firms need key person insurance
Legal & General lists, among the things a payout could help with, the loss of personal or business contacts the key person kept up, and customers losing confidence in the business (Legal & General ↗).
Those are the risks a firm built on relationships carries.
Royal London says a key person could include partners, members, senior employees or the owners themselves (Royal London ↗).
- 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 ↗).
Key people in professional firms
Legal & General says a key person is anyone whose skill, knowledge and experience affects revenue (Legal & General ↗).
In a firm that bills for people's time, map that to your partners, fee earners and the people clients ask for by name.
Shareholding or partnership share is not the test: Royal London says a non-shareholding employee could easily be key (Royal London ↗).
- Owner/founderCheck this role
- CEO
- Operations manager
- IT manager
- Web developer
- Sales leadCheck this role
- Employees with lots of contactsCheck this role
- Exceptional talentsCheck this role
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.
Key person insurance vs partner protection
Key person cover protects the firm's profit.
Aviva describes shareholder protection as protection against the financial consequences if a shareholder or partner passes away (Aviva ↗).
It is about who owns the firm afterwards.
Royal London says partners pay partnership protection premiums from their taxed income, or, where the partnership pays, the premiums are shown as drawings from their capital accounts (Royal London ↗).
For a company, the equivalent of partner protection is shareholder protection with a cross option agreement (Royal London ↗).
Calculating cover for professional services
Royal London uses a salary multiple only where the key person is an employee rather than a partner or member (Royal London ↗), so for a partner, start from profit.
No insurer publishes amounts for professional firms, and we do not estimate one.
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.
- Royal London: partnership protection tax ↗How partners pay for partnership protection
- Aviva Business Life Insurance Options ↗Who the policy is available to, and what it is for
- 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
Professional services 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.