What is "key person insurance"?

Key person insurance is a type of coverage taken out by a business on the life of an essential employee, typically someone whose skills, knowledge, or experience are crucial to the success of the business. In the event of this key person's death or disability, the business receives a death benefit that can help cover financial losses, assist with recruiting and training a replacement, or support the business through the transition. This insurance is vital for small to medium-sized enterprises, where the loss of a key individual could significantly impact operations, revenues, and financial stability. It provides a measure of financial protection and ensures the continuity of the business during a challenging time.