Aviva's Keyman Insurance is one of a select number of policies available in the UK that let you insure the lives of others in your business, with the benefit being paid to the business, not the deceased’s loved ones. Keyman Insurance, or "Business Life Insurance", as Aviva calls it, provides companies with the reassurance that should a vital team member die, there will be some financial support. Of course, no amount of money can compensate for the loss of someone in a business, but having some extra funds can help ease worry during what will be a difficult time.
Much the same as other types of life insurance, Aviva's Business Life Insurance will also cover the individual for terminal illnesses, with critical illness cover being an additional option.
If you are reading this guide and require cover for yourself personally, but paid for through your business, please read our guide to directors' life insurance.
As one of the largest insurers in the UK, you've likely either had a policy from Aviva or at least have heard of them. Aviva provides a range of insurance products, alongside savings and pensions, to some 15.5 million people in the UK. What is perhaps most reassuring is that in 2018, Aviva paid out 98% claims, which, when you consider they provide a wide range of insurance products, is impressive.
Aviva has amassed a whopping 7,919 reviews on Trustpilot at the time of writing, with a score of 4.6 out of 5. Again, bearing in mind their broad range of products and services, we feel that this is an excellent demonstration of their commitment to their customers. Of course, we should point out that these reviews aren't specifically for their business life insurance, but they are encouraging nonetheless.
Aviva's Business Life Insurance will pay out a lump sum to the company (policy owner) if the insured (employee) dies during the policy term. Terminal illness cover is included with the policy by default, but as an additional option, you can also choose to take out critical illness cover, which provides extra protection. Aviva's Business Life Insurance can be used to cover the life of one (single) or two people (joint), with the former often being the most common choice. The reason for that is if you have a joint policy and one of the people covered on the policy dies, the policy will pay out and then cease, leaving the second person uninsured. By taking out single policies for each individual, you can avoid this situation.
Here are some quick reference key facts about Aviva's Business Life Insurance:
- Cover employees between the ages of 18 and 77
- Terminal illness cover included as standard
- Critical illness cover an optional extra
- A policy can last between one and 50 years
- Choose between level cover or decreasing cover
Types of cover
There are two primary types of cover you can choose from with this policy:
- Level cover - the lump sum and, therefore, the level of cover remains the same throughout the policy term.
- Decreasing cover - the lump sum decreases each month, which is usually in line with a loan.
If you have level cover, you can choose to offset the effects of inflation by increasing your cover amount each year without being subjected to any further medical or financial checks. As you might expect, with an increasing level of cover, your premiums will rise too, so bear this in mind and make sure that it will be affordable in the long term.
There are two types of increasing cover; indexed-linked increasing cover and fixed increasing cover. Index-linked increasing cover will rise each year in line with the Retail Price Index (RPI) up to 10%. Your premiums will also increase each year in line with RPI multiplied by 1.5; if the RPI doesn't increase, your premiums will remain the same. The maximum increase you can expect in a year is 15%. With fixed increasing cover, you choose how much you would like it to rise by each year when you take out the policy. This makes the policy more predictable, but you should bear in mind that you may not wholly counteract the impact of inflation if you opt for a small increase each year. With Aviva, you can choose to increase your level of cover by 3% or 5% each year, with premiums increasing by a factor of 1.5 alongside this.
Optional critical illness cover
As we've mentioned, when you take out your policy, you'll get the option to add critical illness cover, much the same as you would with a personal life insurance policy. If you're taking out a Keyman Insurance policy to protect you from the impact of losing an important employee, then considering critical illness cover, too, might be wise. Many illnesses could prevent employees from working, and critical illness cover protects your company from some of those. What is covered will depend on the individual’s own medical history. To give you an idea of what's covered, though, here is an overview:
(Please note: this isn't a complete list, this is merely a snippet of what is included, and you should request a complete list when you speak to a business protection specialist)
- Alzheimer's or pre-senile dementia
- Bacterial meningitis
- Cardiac arrest
- Heart attack
- HIV infection
- Kidney failure
- Liver failure
- Loss of hand or foot
- Loss of speech
- Major organ transplant
- Paralysis of a limb
- Severe lung disease
- Third-degree burns
- Traumatic brain injury
As we say, this list is based on a few assumptions and what your employee will be covered for may be different, so please ask for a complete list when you speak to an adviser.
Business change benefit
As your business changes and grows, you may find that your requirements change and you want to increase your level of cover. Aviva's business change benefit allows you to take out more cover without answering any further medical questions. This benefit is only available if Aviva accepts your policy on their standard terms, so please check your policy schedule to see if that is the case.
What is a waiver of premium?
If you opt for a waiver of premiums, Aviva will pay your premiums if the life covered cannot work due to illness or injury. Similarly to income protection products, waiver of premiums has a deferred period, meaning an amount of time that the insured needs to be unable to work before the benefit kicks in. The deferred period is typically one, three or six months.
When the deferred period ends, Aviva will start paying your premiums until either the policy ends, the individual insured returns to work, or they are no longer ill or injured.
What is Aviva's conversion option?
If you take out a policy with level life cover, you will get the option at any point during the policy's term to convert it to a whole of life plan without needing to answer any further medical questions. So rather than the cover stopping at the end of the policy, it'll continue for the rest of the insured's life. It's important to point out that Aviva doesn't currently allow you to take out this option if you have opted for critical illness cover, nor do they allow you to convert if you have an increasing cover option.
The way HMRC treats premiums and payouts from keyman policies (including Aviva's) will depend on whether you're insuring the life of an individual on a keyman basis, protecting a business loan or a shareholder. It's therefore crucial that you seek independent financial advice when it comes to taxation, as how your policy will be taxed will depend on your circumstances.
Currently, the only way to buy Aviva's Business Life Insurance is via an intermediary (i.e. broker). The good news is that the services that a broker provides are free of charge, so you will receive free advice and a bird's eye view of all of the products on the market without spending a penny. To compare the UK's providers of keyman insurance, please request a quote, and one of our business protection experts will be in touch.
There are, of course, other providers of Keyman Insurance, and we'd always recommend that before taking out a policy, you review the market to establish which one is the best for you. Here are some of the other leading providers who our advisers will typically include in a market review for clients:
When you request a quote from Business Protection Hub, we put you in touch with a specialist business protection broker who'll first take time to understand your requirements before doing a thorough market analysis on your behalf.