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Keyman insurance:

How can the cash be used if a policy pays out

This depends on the type of policy. Keyman Insurance is one of the 3 types of cover available under the umbrella of Business Protection Insurance. See below

With a dedicated Keyman Insurance/Profit Protection policy the company receives a cash injection and it's free to use this money as it chooses. Perhaps for recruitment, training of new staff or just to offer the company some security during the period of readjustment.

However, the other forms of business projection are more restrictive, for example -

  • Loan Protection - As its name suggests if the policy pays out the money has to be used to cover the company's debt obligations, including corporate loans, mortgages and overdrafts.
  • Ownership protection - The money is to be used to buy out the shares of a partner or director should he pass away or suffer a critical illness
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