Key Person Life Insurance

Key person life insurance is a type of life insurance policy that a business can purchase to protect itself against financial loss that may result from the death of a key employee or executive.

A key person is someone whose skills, knowledge, experience, or leadership is considered critical to the success of the business. The policy is purchased by the business, which is typically the beneficiary of the policy. If the key person dies, the business will receive a death benefit that can be used to cover the costs of finding and training a replacement, paying off debts, or covering any lost income that may result from the loss of the key person.

The amount of the policy is typically based on the estimated financial impact that the loss of the key person would have on the business. Factors that may be considered in determining the policy amount include the key person’s salary, contributions to the business’s revenue, and the cost of finding and training a replacement.

Key person life insurance is important for businesses that rely heavily on the skills and knowledge of a key employee or executive. Without proper coverage, the death of a key person could result in significant financial losses and disruption to the business.