main principles of key person insurance taxation were outlined by the Chancellor of the Exchequer in 1944, Sir John Anderson. The "Andersen Rules" state: His Majesty's Revenue and Customs has taken the view that key person insurance is tax-efficient if it is taken out "solely for the purposes of the business". Specifically, if the company takes out a key person insurance policy to protect the business from any loss of profits that have stemmed from the loss of the employee, then the premiums are not taxable. If a key employee has a substantial number of shares, then the key person insurance could potentially be seen as being taken out for their own interests, instead of those of the business. This is particularly the case if critical illness cover is added to the policy. Essentially, key person insurance can be tax-efficient, but it is always best to check with a financial advisor or the local tax office before making assumptions. References Types of insurance Business continuity