Key Person Insurance & Your Business

Running a company is not easy: not only are you busy with setting up your business, hiring the right people, and staying on top of your bills, you also have to worry about insuring your business so that you’re protected against property damage and lawsuits. But have you thought about insuring your most valuable asset, your key employee/s? There is a way that you can financially protect your business against the loss of a partner or other key employees and the damage this loss can do to the business you worked so hard to build: purchasing a key person insurance policy. 

What Is Key Person Insurance?

silhouette of a hand picking up a silhouette of a man amongst other men
Key person life insurance can help cover costs of hiring and training a new person to replace the key person of a business.

Key person insurance is a life insurance policy that a business can take out on the life of an owner, executive, co-founder, business partner, or any other individual that is considered critical to the business, and whose death would hurt the company financially. Unlike with personal life and disability insurance, with key person insurance, a business entity buys the policy, is the beneficiary of the policy, and pays the premiums. The policy will help with any losses that stem from the death of your key employee, including protecting your company from profit loss, guaranteeing your business loans, and protecting your shareholders. 

In the event of the passing of the key person, your business will receive the insurance payout, which can be used to:

  • Cover the cost of hiring and training a replacement for the key person 
  • Offset day-to-day operating expenses
  • Supplement lost revenues until a replacement can be hired

In the instance that your company can no longer operate after the key person passes, the money can be used to:

  • Pay off any debts
  • Provide severance to employees
  • Distribute money to investors

Essentially, this type of life insurance will give your business options other than bankruptcy in the face of the loss of a key employee.

Which Businesses Should Consider Key Person Insurance?

This type of life insurance policy can be especially beneficial for small businesses or startups that have a small team, and are most often used to insure the owner or founder of the small business. But this doesn’t mean that this type of insurance isn’t also useful for larger scale businesses: every business has at least one key employee whose death would cause financial distress to the company.

How Much Does Key Person Insurance Cost?

red money sign next to a green question mark
The price of key person insurance varies on multiple factors, which is why it is best to compare plans with an agent.

The price of a key person insurance policy varies depending on multiple factors, including how large of a policy you would like to take out: you can request policies that pay out as little as $100,000 or as much as $1 million. Other factors that insurance companies take into consideration include the insured person’s age and overall health, as well as which type of insurance policy you decide to take out; for example, as with other types of life insurance, you can opt for either a permanent life insurance policy or a term life insurance policy, which is significantly cheaper. In order to find the right plan, you will have to compare different policies from different insurance companies, because they all offer different levels of coverage at different prices.

The best way to find the right key person life insurance policy for your business is by working with an agent who specializes in key person life insurance. We have provided the top life insurance companies in the nation below; each offers hassle-free assistance and the most competitive rates. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder for your business by a financial burden, check key person life insurance rates today.

About The Author:
Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.

Leave a Reply

Your email address will not be published. Required fields are marked *