Key person insurance is a life policy the business buys and owns on a critical individual, naming the business as beneficiary. The benefit offsets the financial impact of losing that person: lost revenue, the cost to recruit and train a replacement, and reassurance to lenders and partners.
Why a business insures a person
In many businesses, one or a few people drive the revenue, the relationships, or the operations. Losing them suddenly is not just a personal loss, it is a financial shock: sales that walk out the door, projects that stall, and lenders who get nervous. Key person insurance converts that risk into a known, funded plan. The business receives a benefit it can use to steady itself rather than scrambling for cash at the worst time.
Who to insure and for how much
The right people to insure are those whose loss would materially hurt the business: founders, top producers, a lead engineer, or anyone whose departure would cost real money. Sizing the coverage means estimating the financial impact: lost profit during the transition, the cost to find and train a replacement, and any debt that loss would jeopardize. The number should reflect what it would actually take to keep the business whole.
How it fits broader planning
Key person coverage often sits alongside other business uses of life insurance, including buy-sell funding and owner protection. Because the business owns the policy and is the beneficiary, the tax treatment of premiums and proceeds has specifics that should be reviewed with your accountant. We are not your tax or legal advisor, so we structure the coverage and coordinate with the professionals who handle that side, so the plan holds together.
How we handle it
We identify which people genuinely create key person exposure and size the coverage to the real financial impact. We compare carriers and structure the ownership and beneficiary correctly. We coordinate with your accountant and attorney on the tax and agreement details. And we revisit it as roles and the business change, since the key people of today are not always the key people of five years from now.
