Key Person Life Insurance

Running a business comes with a long to-do list—marketing, payroll, inventory, taxes. But there’s one thing that’s often overlooked (and it could cost you everything if ignored):
Key Person Life Insurance.

In today’s volatile business landscape, protecting your most valuable human assets is no longer optional—it’s essential. If you’re a business owner, this might be the smartest (and most affordable) move you haven’t made yet.

Let’s unpack why.

🧠 First, What Is Key Person Life Insurance?

Key Person Life Insurance is a life insurance policy a business takes out on its most crucial employee—usually the owner, a partner, or a high-level executive.

The business pays the premiums, is the policy’s beneficiary, and receives the death benefit if that key person dies unexpectedly.

In plain English: If someone’s death would financially cripple your company, you need key person insurance on them.

👔 Who Qualifies as a “Key Person”?

It’s not just the CEO. Think about:

• The founder who holds your vision together
• The sales executive who brings in 70% of your revenue
• The partner with the secret sauce
• The CFO who runs your books with precision

If losing them means you’d struggle to keep the lights on, they’re a key person.

💣 What Happens If a Key Person Dies Without Coverage?

Let’s be real: Most small businesses are not prepared for that kind of loss.
Without key person life insurance, your company may:

• Lose crucial client relationships
• Delay projects or product launches
• Experience revenue collapse
• Struggle to find a qualified replacement
• Shake investor or customer confidence
• Even face total shutdown

In fact, 70% of small businesses close within one year after losing a key person unexpectedly.

📈 How Key Person Life Insurance Protects Your Business

Here’s what this coverage actually does for you:

It’s not just about death—it’s about stability, succession, and survival.

🛠️ How Much Coverage Should You Have?

There’s no one-size-fits-all, but here are some common methods:

• Revenue Replacement: 5–10x the key person’s annual contribution to revenue
• Cost to Replace: What would it cost to recruit, hire, and train a replacement?
• Loan Protection: Enough to cover business loans if a lender requires it

Talk to a professional (like us) to tailor coverage to your company’s exact structure and goals.

💼 Business Owners, Don’t Forget This:

If YOU are the founder or owner, your business is probably heavily reliant on you.
So let’s flip the mirror:

• Could your team keep things running without you?
• Would your family inherit the business—or its debts?
• Could your co-owners buy your share if you passed away?

If the answer to any of those is “I’m not sure,” you may also need a Buy-Sell Agreement funded by Executive Life Insurance.

🚀 Bonus: It Can Be a Tax-Deductible Business Expense

While the death benefit is typically tax-free, your business may also enjoy potential tax advantages when properly structured. (Consult your CPA or tax advisor for details.)

🧩 Key Person vs Executive Bonus vs Buy-Sell—What’s the Difference?

Each of these tools serves a different but critical purpose in your business succession and risk strategy.

🔍 Bottom Line: Key Person Insurance Is the Smart Owner’s Secret Weapon

It’s like a safety net for your business.

In 2025’s fast-moving world, losing a key team member without backup can mean the end of your company. But with a well-structured key person life policy, you’ll have the time, cash, and options you need to protect what you’ve built.

You insure your building, your equipment, and your data. Why wouldn’t you insure the people who make it all work?

🧠 Start a no-pressure conversation here:
👉 https://thepolicyshop.com