Key Person Insurance
Life (and sometimes disability) insurance the business owns on a person whose death would seriously disrupt operations or financing.
What it is
The business is the owner, premium-payer, and beneficiary of a policy on a key person — usually the founder, top salesperson, or a critical technician. If they die, the death benefit gives the company cash to absorb lost revenue, recruit a replacement, reassure lenders, and stabilize the team.
How much coverage
Common rules of thumb: 5–10x annual compensation, OR the projected revenue/profit loss for 2–3 years, OR enough to cover personally-guaranteed business debt. The Key Person calculator in this discovery builds it from those components.
Loan-required coverage
SBA and most commercial lenders require key-person coverage on the principal as a condition of the loan; collateral assignment to the lender is standard.
Educational only — not tax, legal, or investment advice. Talk through your specific situation with a qualified advisor.