what is key person 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 understanding key person insurancekey 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 definitely worth considering in addition to life insurance key person insurance is also available as disability coverage in case the individual is incapacitated and no longer able to work the process of key person insurancefor key person insurance a company purchases a life insurance policy on certain employee s pays the premiums and is the beneficiary of the policy in the event of the person s death the company receives the policy s death benefit that money can be used to cover the costs of recruiting hiring and training a replacement for the deceased person if the company doesn t believe it can continue operations it can use the money to pay off debts distribute money to investors provide severance benefits to employees and close the business down in an orderly manner key person insurance gives the company some options other than immediate bankruptcy to determine whether a business needs this kind of coverage company leaders must consider who is irreplaceable in the short term in many small businesses it s the owner who does most things such as keeping the books managing employees handling key customers etc without this person the business can come to a stop categories of loss covered by key person insurancekey person insurance can cover a company against a range of risks for example it may provide cost of key person insurance