Business & Key Person Insurance

What Is Key Person Insurance?

Key person insurance is a life insurance policy purchased by a business on the life of a key employee, owner or partner. The company pays the premiums and receives the death benefit if the insured person dies. This payout helps offset the financial impact of losing someone whose skills, knowledge or leadership are critical to the business’s operations【482664422689532†L58-L97】.

Why It Matters

Many small businesses depend on one or two individuals for revenue, client relationships or technical expertise. If that person dies unexpectedly, the business may struggle to survive. Key person coverage provides funds to:

• Recruit and train a replacement.
• Cover lost profits during the transition.
• Pay off business debts or lines of credit.
• Provide severance for employees if the business must close【482664422689532†L58-L97】.

Buy‑Sell Agreements

If your business has multiple partners or shareholders, a buy-sell agreement funded by life insurance can ensure continuity. A buy‑sell agreement outlines how ownership interests will transfer if an owner dies, becomes disabled or exits the business. Life insurance proceeds provide the funds to buy out the deceased partner’s shares so the remaining partners retain control【908029014170804†L247-L334】.

Common structures include:

• Cross‑purchase agreements: Each owner buys a policy on the other owners. When one dies, the surviving owners use the proceeds to buy the deceased owner’s shares.
• Entity purchase agreements: The company buys a policy on each owner and purchases the deceased owner’s shares using the death benefit.

Who Should Consider Key Person Coverage?

This type of insurance is essential for:

• Small businesses dependent on a founder, top salesperson or technical expert.
• Partnerships that want to fund buy‑sell agreements and ensure smooth succession.
• Startups seeking investor capital (investors often require key person coverage).
• Businesses with loans that require collateral or key person policies as a condition.

Protect Your Business Legacy

Our experienced brokers can design key person and buy‑sell insurance strategies tailored to your business needs.

Life Insurance for Business Owners: Key Person & Buy‑Sell Basics »