Keyman Insurance

Key person insurance is a life insurance policy that a company purchases on the life of an owner, a top executive, or another individual considered critical to the business. The company is the beneficiary of the policy and pays the premiums. This type of life insurance is also known as “key man (or “keyman”) insurance,” “key woman insurance,” and “business life insurance.”

Key person insurance offers a financial cushion if the sudden loss of a certain individual would profoundly negatively affect the company’s operations. The death benefit essentially buys the company time to find a new person or to implement other strategies to save (or shut down) the business.

In a small business, the key person is usually the owner, the founders, or perhaps a key employee or two. The main qualifying point is whether the person’s absence would cause major financial harm to the company. If this is the case, key person insurance is worth considering.