Key Person Insurance — Protecting the People Who Drive Your Business

What it is, why it matters, and whether your business needs it

Every business has people who are essential to its success — visionaries, rainmakers, technical experts, or the one person whose relationships, knowledge, and leadership power everything running. What happens to your business if that person is suddenly gone?

Key Person Insurance, is a life and/or disability insurance policy that a business takes out on a critical employee or owner. The business owns the policy, pays the premiums, and names itself as the policy owner and the beneficiary. If the key person passes away or becomes disabled, the business receives the insurance proceeds, giving it the financial cushion to recruit, transition, and stabilize.

"The loss of a key person is one of the most underestimated risks a business can face — and one of the most affordable to protect against."

Why Businesses Need It

• Loan & credit protection — Lenders and investors often require key man coverage before extending credit or capital to a business.
• Recruitment & continuity — Provides cash to find the search, hiring, and onboarding of a qualified replacement, keeping operations running.
• Buy-sell agreements — In partnerships, key man coverage is often used to fund a buyout if a partner can no longer continue.
• Client & contract confidence — Coverage reassures clients and partners that the business will fulfill its obligations even through unexpected transitions.
• Revenue protection — If key person departure creates a significant portion of revenue, their loss could be financially devastating without a safety net.

Key Person coverage is highly customizable. Policies can be structured on term, permanent life, disability, or a combination, depending on the nature of the risk and the size of the business. Premiums are generally based on the insured person's age, health, and the coverage amount needed.