Key person insurance is a life or disability policy that a business buys on a vital employee whose death or incapacitation would cause a significant financial loss. The business itself is the beneficiary, receiving the funds to cover losses, hire a replacement, or pay off debts, thereby ensuring the company’s continuity and stability during a difficult transition.
- What It Is: A life or disability insurance policy that a business purchases on a crucial employee. The business is the beneficiary.
- What It Covers:
- Financial Payout: The business receives the payout upon the death or disability of the key person. These funds can be used to cover losses, hire a replacement, or pay off debt.
- Who It’s For: Small businesses that rely heavily on one or two individuals for their success.
- Key Considerations: It can reassure lenders and investors about the company’s stability and succession plan.