By Andrew Davies
Director and Insurance Adviser — Tidal Life & Health Insurance

Running a successful business often depends on one or more key individuals whose skills, knowledge, relationships and role in the business are essential for daily operations, strategy, sales and technical expertise. But what happens if one of those individuals is suddenly unable to work due to illness, disability, or death? In most cases this change will happen without warning and for many businesses, the financial and operational impact can be severe.

For business owners, planning for these worst case scenarios is not about pessimism, it’s about being prepared. Just as a business will insure its physical assets, insuring yourself or your people is just as important.

Key Person cover can include life insurance, trauma cover, permanent disability, income protection and business overheads cover, with the levels of coverage tailored to the unique challenges each business will face.

The ability of a business to sustain the loss of a Key Person will depend on a variety of factors, including:
• Size and nature of the business
• Role of the key person and options to cover the loss internally with existing staff
• The financial revenue contribution made by the Key Person. For many SME businesses the Key Person may be the only income generating person
• Projected losses, ongoing business overheads and debt liabilities
• Existing contingency measures and cash reserves
• Shareholder risk tolerance
• Changing risk profile based on disability timescales

Key Person Insurance is designed to protect your business against this risk. It provides a financial buffer if a director or Key Person is unable to work on a temporary or permanent basis. It is typically used to cover costs such as recruiting replacements, maintaining cash flow, and providing business continuity while the business adapts to the period of change. Without insurance to provide financial support, companies can face significant disruption, loss of revenue, and even jeopardise their long-term viability.

A well-considered insurance plan will allow the business to continue to operate at a similar capacity until the Key Person is able to return to work, or alternative arrangements are implemented. This not only safeguards the business operations but offsets losses, covers overheads and maintains shareholder value and remuneration.

Independent research by Quality Product Research Ltd 2025 has calculated the probability of a business owner suffering a health event before the age of 65. This is based on individual ownership, joint ownership (or couple) and as a 4-person shareholding. This highlights the very real potential for a health event to disrupt your business.

Tidal Life & Health Insurance
We specialise in providing Key Person insurance advice. We work with business owners and professionals across Hawke’s Bay and New Zealand who value having a plan and managing risk effectively. Our role as adviser is to help you identify vulnerabilities and put solutions in place that protect both your business operations and your peace of mind.

If your business relies on you, or key individuals, now is the time to review your protection strategy. Contact Andrew at Tidal Life & Health to discuss your business risk exposures and complete a risk assessment.
Andrew Davies is Director and Insurance Adviser at Tidal Life & Health Insurance
www.tidalfs.co.nz
andrew@tidalfs.co.nz