What is key-person insurance?
Key-person insurance is a policy a company owns on an individual whose loss would seriously harm the business, designed to give the company funds to stabilize and recover.
Key-person insurance is coverage a business owns on the life (and sometimes the disability) of an individual whose loss would materially damage the company. The business pays the premiums and receives the benefit, giving it cash to stabilize operations, reassure lenders, and recruit a replacement.
Who counts as a key person
Usually a founder, a top producer, or a technical lead whose sudden loss would move revenue, credit, or operations. If losing one person would shake the business, that person is probably insurable as a key person.
How much and what type
Coverage is generally sized to the financial impact of the loss: lost profit, the cost to replace, and any loans that depend on the person. Term coverage is common; the structure should be coordinated with your buy-sell and estate planning.
Common questions
Is key-person insurance tax deductible?
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