Key Person Insurance is a life insurance policy that a company purchases on a key executive’s life. The company is the beneficiary of the plan and pays the insurance policy premiums. This type of life insurance is also known as “key man insurance,” “key woman insurance” or “business life insurance.”
KEY TAKEAWAYS
- Key Person Insurance is a life insurance policy a corporation buys on the life of its top executives.
- Such insurance is needed if that executive’s death or inability to work would be devastating to the future of the company.
- For small businesses, the key person might be the owner or founder, and in some cases, the only person capable of running the business.
- The company pays for the insurance, pays the premiums and is the policy beneficiary, should the person die or become incapacitated.
