This type of insurance is intended to assist if a specific person’s death would have a major, negative impact on the company’s future.  The business is the beneficiary on the policy and pays the policy premiums.  The death benefit can help pay for recruiting, hiring and training a replacement for the deceased individual. It can also be used to pay off debts, provide employee severance and shut the business down if the company doesn’t think it can continue operations without the key person.  Costs for this type of coverage can vary depending on the key person’s age and health, just like other types of life insurance.  The size and nature of the business, as well as the key person’s role, can be used to determine the appropriate amount of coverage to purchase.

If there’s a person at your company whose absence would cause significant financial harm to the business, investing in key person insurance is worth exploring.