What is Key Person Insurance?
Answer:
Key person insurance is a type of business insurance


that protects a business if a “key person” is lost. Key persons are often business owners, partners, majority stockholders, or people who play a critical role in the company’s overall success.

For example, a scientist on the verge of a major breakthrough may be a key person to a biotech company. If this scientist were to die or become disabled, the company could be financially devastated by the loss of this key person.

Key person insurance is usually initiated by the company, paid for by the company, and owned by the company. If the key person dies, the company is the beneficiary. The key person must be notified of the insurance and agree to the purchase of a life insurance policy on his life.

When purchasing key person insurance on a key person, the premiums will depend on a variety of factors including health history, age, and the amount of coverage desired. Consider how much is at stake should this key person die including lost sales and costs associated with replacing this person.
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