What would happen if your top salesperson, founder, or CEO suddenly passed away or became disabled? For many small and mid-sized businesses, the loss of a key person can lead to financial collapse. That’s why businesses need Key Person Insurance—a specialized life and disability policy that protects the company’s financial future.
What is Key Person Insurance?
Key Person Insurance is a life or disability insurance policy that a company takes out on a critical employee. If the person passes away or becomes disabled, the business receives a payout to cover financial losses.
Who Needs Key Person Insurance?
Businesses that rely heavily on one or two key individuals should consider this coverage, including:
✔ Small businesses with founders who manage major clients.
✔ Tech startups where innovation depends on one or two key developers.
✔ Law firms, accounting firms, and medical practices.
✔ Sales-driven companies with a “rainmaker” generating most of the revenue.
What Does Key Person Insurance Cover?
💼 Lost revenue while the company recovers.
💼 Recruiting & training expenses for a replacement.
💼 Debt repayment & investor protection to stabilize the business.
💼 Buy-sell agreements if ownership needs to be transferred.
Real-Life Example: Why It Matters
Imagine a high-growth startup in Denver that relies on a brilliant software engineer. If that person unexpectedly passes away or becomes disabled, the company could:
❌ Lose clients & product development momentum.
❌ Struggle to attract investors due to leadership uncertainty.
❌ Face massive recruitment & retraining costs.
With Key Person Insurance, the company receives a lump-sum payout to cover these costs and ensure survival.
How Much Does It Cost?
The cost depends on:
- Employee’s salary and role.
- Coverage amount needed (most businesses choose $500K – $5M).
- Age & health of the key person.
Final Thoughts
If your company relies on a few key people, Key Person Insurance is a must-have to ensure financial stability. It protects investors, employees, and the future of the business—giving you peace of mind in case the unexpected happens.
