Key Person Life Insurance for Your Business Explained

Key Person Life Insurance for Your Business

As a small business owner, you may employ at least one individual who is essential to your company’s success. This person may be a partner, or have a unique expertise that is unmatched throughout the rest of the company. If this person’s exit from the company is planned, such as retirement or voluntary termination, then you can prepare for the loss and take the necessary precautions to minimize the impact. However, if the departure is unplanned due to an unexpected death, disabling accident or a sudden quitting, then the company is exposed to financial risks.

If you employ individuals who are vital to your company’s success, especially if your business is small, consider key person life insurance. Key Person Life Insurance solutions can protect your organization’s solvency in the event that you lose the key person without warning, and also the investments made by lenders and investors to your company.

Advantages of Key Person Life Insurance
  • Key Person Life Insurance can be easily implemented
  • Key Person Life Insurance benefits are paid to the company tax-free.
  • Through Key Person Life Insurance Customers, creditors, lenders and stockholders have the assurance that the business has a continuation plan and coverage in place.
  • There is flexibility in what the Key Person Life Insurance funds can be used for.
How does Key Person Life Insurance Protect My Company?
  • You purchase Key Person Life Insurance on the key individual(s).
  • You are the beneficiary of the Key Person Life Insurance policy, and apply for and own the policy. If the key employee dies prematurely, the Key Person Life Insurance policy pays out to you.
  • Tax-free dollars from the Key Person Life Insurance policy can be put towards finding, hiring and training a replacement employee, compensation for lost business during the transition and/or financing timely business transactions.
  • A Key Person Life Insurance policy can be transferred to a departing key employee as a retirement benefit or to a different key individual, upon the retirement of the original key employee.
  • With the assistance of a good lawyer and insurance agent Key Person Life Insurance can be used to buy out the key employee’s shares or interest in the company.
  • Key Person Life Insurance premiums are based on several factors, including the key employee’s age, physical conditions and health history. The amount of coverage also affects the premium.
Key Person Life Insurance Considerations to Ponder…

Would losing one of your employees have one or more of the following effects?

  • Jeopardize your financial security?
  • Create a loss of a specialized skill?
  • Disrupt everyday business operations?
  • Create customer concern due to a loss of expertise?

To learn more about how Key Person Life Insurance can fit into your overall risk management program speak to an ALIGNED Insurance Advocate Today or connect with us at

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