In many small businesses, one person holds the relationships, the expertise, or the revenue that the whole company depends on. If that person can't work — or worse — the business faces a crisis that no operating budget was built to absorb. Key person insurance is the coverage that turns that existential risk into a manageable one.
How it works
The business owns and pays for a life (and often disability) policy on the key person, and is the beneficiary. If the key person dies or can't work, the business receives a tax-free lump sum to cover lost revenue, fund a replacement, service debt, or simply buy time to restructure. It's the business insuring its own continuity.
How much to carry
A common approach is to insure the key person for a multiple of their contribution to revenue — often five to seven times — plus the cost of replacing them. The right number reflects how long it would take to rebuild what they bring and how much revenue is at risk in the meantime. We help owners quantify that exposure rather than guess at it.
It pairs with a succession plan
Key person coverage is most powerful alongside a buy-sell agreement funded by life insurance, so that an owner's departure triggers an orderly transfer rather than a forced sale. Together they protect both the business and the families that depend on it. We structure both so the business survives the very event that threatens it most.
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