Your Business Can't Afford to Lose Its Most Important Person.

Key person insurance is a life insurance policy that a business purchases on its most essential employees — typically owners, partners, executives, or top revenue producers. The business owns the policy, pays the premiums, and is the beneficiary. If the key person dies or becomes permanently disabled, the business receives a payout to cover lost revenue, recruit a replacement, pay off debts, or fund a buy-sell agreement.

A common rule of thumb is 5 to 10 times the key person's annual gross compensation (salary, bonuses, benefits, and stock). For an executive earning $200,000, that means $1 million to $2 million in coverage. You should also consider replacement costs, revenue contribution, and how long it would take to find and train a successor. We help you calculate the right amount based on your specific situation.

Generally, the death benefit from a key person life insurance policy is received tax-free by the business — provided the arrangement is structured correctly and the business obtained the employee's written consent before purchasing the policy. Premiums paid for key person insurance are generally not tax-deductible by the company. We recommend consulting with your tax advisor for your specific situation.

Term insurance is simpler and cheaper — ideal when you need coverage for a specific period, like the length of a business loan or until retirement. Permanent insurance costs more but provides lifetime coverage and builds cash value that the business can borrow against. The right choice depends on your timeline, budget, and whether you want the cash value component. We help you compare both options.

Yes. By law, a business cannot purchase a life insurance policy on an employee without their knowledge and written consent. The key person must agree to the policy, and they may need to undergo a medical exam depending on the coverage amount and their health history. The business must also file IRS Form 8925 annually listing its key person policies.

Yes — this is one of the most common uses. In a partnership, each partner purchases a key person policy on the other partner(s). If one partner dies, the surviving partners receive the death benefit and use it to buy the deceased partner's ownership share from their estate. This keeps the business intact, avoids probate disputes, and ensures a smooth transition.