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Also called key man insurance

Key person
life insurance.

A policy your business owns on someone it can't easily replace, so the company has cash to steady itself if that person dies.

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Is this you?

One name on
every big deal.

Key person coverage is worth a look when a business leans hard on one or two people:

Our top seller brings in the big accounts.

If that relationship walks out the door, sales can fall for months. The policy gives the company money while it rebuilds.

Only one person knows how the work gets done.

A founder or lead technician can be hard to replace. Hiring and training someone new costs time and money.

Our lender is watching closely.

Losing a key person can worry banks and investors. Cash from a policy can help keep loans and payroll on track.

Colleagues reviewing figures on a laptop during a meeting

How it works

Who owns it,
who pays, who gets paid.

The setup is what makes it key person coverage.

  • The business owns the policy and pays the premiums.
  • The business is the beneficiary and receives the death benefit.
  • Before the policy is issued, the insured person should get written notice, including that the business will be the beneficiary, and give written consent. Under federal tax rules (IRC §101(j)), skipping this step for an employer-owned policy can make much of the payout taxable.
  • Premiums are usually not tax deductible when the business is the beneficiary. Talk with your CPA or attorney before you set this up.
  • Term coverage is common. Some businesses choose permanent coverage for longer needs.
Paul Daniels
Paul DanielsLicensed insurance agent · NPN 20986580

How we help

Sizing it is a business question.

There is no set formula. Some businesses look at the profit the person brings in, the cost to replace them, or loans the person's loss could put at risk. We help you lay out those numbers, and the insurance company decides how much it will approve.

If the same people are also owners, you may need buy-sell coverage too. They solve different problems.

  • Plain notes for your CPA
  • Life insurance in states where we are licensed for life insurance · Paul Daniels, NPN 20986580 · FL license G065122
  • No fee for our help. If you buy, the insurance company pays us a commission, and commissions can differ by company.

Three steps

Key person life insurance, step by step.

Name the key people

Who would be hardest to replace, and why.

Estimate the hit

Lost profit, hiring costs, and debts that could be affected.

Apply with consent

The insured person signs notice and consent forms before the policy is issued, and the company decides on approval.

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Good to know

It does not replace a plan.

Money helps, but a written plan for who steps in matters just as much.

  • We do not give tax or legal advice.
  • Approval depends on the insured person's health and the business reason.
  • The amount must make sense to the insurance company, not just to you.

Bring to the call

Numbers that help.

  • The key person's role and pay
  • Revenue or profit tied to that person
  • Rough cost to hire and train a replacement
  • Business loans and who guaranteed them
  • Your CPA's contact details

Questions

Key person life insurance FAQ.

As of October 13, 2026.

What is key person life insurance?

It is a life insurance policy a business buys on someone it depends on, like an owner or top employee. The business owns the policy, pays for it, and receives the money if that person dies.

Is key man insurance the same thing?

Yes. Key man insurance is an older name for key person insurance.

Are key person premiums tax deductible?

Usually not when the business is the beneficiary. Talk with your CPA or attorney before you set this up.

Does the employee have to agree?

Yes. For a policy owned by an employer, the employee must get written notice and give written consent before the policy is issued. Missing this step can change how the payout is taxed.

How much key person coverage can a business get?

It depends on the person's value to the business and on the insurance company. Companies often look at pay, profit, and replacement costs. Approval and amount are up to the insurance company.

What happens to the policy if the person leaves?

It depends on the policy and your agreements. Some businesses keep it, some cancel it, and some transfer it. Your CPA or attorney can help you choose.

Related guides

Business owners Buy-sell funding Florida life insurance

Protect the people
the business runs on.

Book a free 15-minute call to talk through your key people.

Book a 15-minute call

By Paul Daniels, licensed insurance agent (NPN 20986580).

Disclaimer

Daniels Health Advisors LLC is an independent insurance brokerage, not an insurance company. Agent: Paul Daniels, NPN 20986580, Florida license G065122. We help with life insurance only in states where we are licensed for life insurance. Life insurance is not health insurance. Every policy depends on approval by the insurance company, based on things like age, health, habits, and income. Prices and terms are set by the insurance company. We never guarantee approval or a price, and we do not promise any company's rates. Cash value, loans, and riders work differently in each policy. This page is general information, not legal or tax advice. Talk with your CPA or attorney about tax and legal questions.