Key Person insurance, or Key Employee insurance, is coverage that will protect a company in the case of an untimely death or disability of a top salesperson, executive or business owner. Key person insurance provides peace of mind to business owners and shareholders alike knowing that the business can continue operations without major disruption in the event of the loss of a key employee. If death or disability strikes the company, key person insurance may be the difference between the company’s demise and its ultimate success.
Key person insurance policies are designed to protect the business not the key employee. If a key employee dies or is disabled, the policy proceeds can be used by the company for any purpose. Normally, businesses will use the funds received from a key person policy to cover expenses associated with finding capable replacements or to cover short term revenue deficits.