Key Person
Coverage on the people your business cannot afford to lose.
Most businesses depend on a small number of people: the owner, a top producer, the person who holds the key client relationships or the technical know-how. If one of them dies, revenue, lender confidence and client relationships can be hit at the same time. Key person life insurance is owned by the business, paid for by the business and pays the business.
The proceeds give the company cash to recruit, hire and train a successor, replace lost profits, reassure lenders and keep operating through the transition. Permanent policies can also build cash value on the balance sheet that the business can access later.
Educational content only; not tax, legal or investment advice. Life insurance strategies depend on underwriting, policy design and the issuing carrier; guarantees are based on the claims-paying ability of the insurer. Policy loans accrue interest and reduce the death benefit and cash value if unpaid. Talk with your own qualified professionals before acting.
Common Questions About Key Person Insurance
What is key person insurance?
Key person insurance is a life (and sometimes disability) insurance policy a business owns on an owner or employee whose loss would hurt revenue, credit or operations. The business pays the premiums and receives the benefit.
Is key person insurance a form of corporate-owned life insurance (COLI)?
Yes. Key person coverage is a common type of corporate-owned life insurance (COLI), where the company owns the policy, pays the premium and is the beneficiary. IRS notice and consent rules under Section 101(j) must be met to keep the death benefit income-tax free.
How much key person insurance does a business need?
Common approaches look at the person's contribution to profit, the cost to recruit and train a replacement, and loans or contracts that depend on them. Our Key Person Insurance Calculator gives a starting estimate.
Can the policy build cash value for the business?
If permanent insurance is used, the cash value can sit on the company's balance sheet as an asset and may later fund a buyout, executive benefits or the owner's retirement.
Educational content only; not tax, legal or investment advice. Talk with your own qualified professionals before acting.
Related Strategies
Does This Fit Your Plan?
Book a strategy call. We'll look at your business, your family and what you already have, and tell you what fits and what doesn't.