Key Person Life Insurance
Key person life insurance is business owned coverage designed to help a company manage the financial impact of losing an essential owner or employee to death, providing funds to maintain continuity and absorb the cost of replacement.
The Business Owns the Coverage
In a key person life arrangement, the business owns the policy, pays the premium, and is the beneficiary. If the key person dies, the business receives the death benefit, which can be used to offset lost revenue, fund the search and cost of a replacement, or maintain stability during a difficult transition.
Because the business owns and benefits from the policy, the coverage is directed at protecting the enterprise rather than the key person's family, which may be served by separate individual coverage.
Who Is a Key Person
A key person is anyone whose loss would create significant financial disruption. That might be an owner whose relationships drive revenue, an executive whose leadership is central to operations, a specialist whose expertise is hard to replace, or any employee whose absence would materially affect the business.
Identifying who qualifies is the first step, and it requires an honest assessment of where the business's value and continuity actually reside.
Continuity and Replacement Costs
Losing a key person is not only an emotional loss but a practical one. Revenue may decline while the role is unfilled. Recruiting and training a replacement takes time and money. The business may need to hire interim help or absorb inefficiencies. The death benefit is designed to provide a cushion against these costs.
For owner led businesses, key person coverage also supports continuity by giving the business resources to weather the transition while a succession plan is executed.
Ownership Considerations
Because the business owns the policy, ownership, beneficiary designations, and the treatment of premiums and proceeds have implications that should be reviewed with your accountant and attorney. The coverage should be coordinated with any buy sell agreements and succession plans so the pieces work together.
Our Approach
We help identify which people the business genuinely depends on, estimate the financial impact of losing them, and structure coverage that reflects that exposure. Where buy sell or succession arrangements are involved, we coordinate with your attorney and CPA so the key person coverage supports the broader continuity plan.