Insurance / Business & Key Person

Business and Key Person Insurance: Protect What Keeps the Company Running

Coverage that helps a business absorb the loss of an owner or an essential person, and keep operating.

A business often depends on a small number of people. Business and key person insurance places coverage on an essential owner or employee, so the company has the funds to absorb the financial impact of losing them, cover debts, reassure lenders, and keep operating while it recovers.

What It Protects

The People a Business Cannot Easily Replace

When one person drives a large share of the revenue, relationships, or expertise, losing them is a financial event. This coverage plans for it.

Protects Against Loss

Provides funds if a key owner or employee passes away or becomes seriously ill.

Funds Business Debt

Helps repay loans and obligations so they do not threaten the company’s survival.

Reassures Lenders and Partners

Shows banks and co-owners that the business can withstand a major loss.

Helps Recruit a Replacement

Covers the cost and time of finding and training someone new.

Supports Continuity

Gives the business breathing room to stabilize instead of scrambling.

Can Fund a Buy-Sell

Works alongside a buy-sell agreement so ownership transfers cleanly.

Who It Is For

Who Should Consider It

If the loss of one person would materially hurt the business, key person coverage is worth reviewing.

Common Questions

Business and Key Person Insurance, Explained

What is key person insurance?

It is coverage a business takes out on an essential owner or employee, so the company receives funds if that person passes away or, in some cases, becomes critically ill.

Who counts as a key person?

Anyone whose loss would significantly affect the company’s revenue, operations, relationships, or ability to repay debt, often an owner, founder, or top performer.

Who owns and pays for the policy?

Typically the business owns the policy, pays the premiums, and is the beneficiary, so the funds go to the company when needed.

How is the coverage amount decided?

It is usually based on the person’s value to the business, such as their contribution to revenue, outstanding debt, and the cost to replace them.

Are the premiums tax deductible?

Premiums for key person insurance are generally not tax deductible, and the tax treatment of proceeds depends on the structure. This should be set up with proper accounting and advice.

How does it fit with a buy-sell agreement?

Key person coverage keeps the business running, while a buy-sell agreement funded by insurance handles the transfer of a departing owner’s share. They often work together.

Protect the People Your Business Depends On

Book a consultation and we will help you structure coverage that keeps your business running.

Manjit Singh Sandhu · Financial Advisor