Key Person Life Insurance: Protecting Revenue, Credit, and Continuity
How key person coverage works, how to size it, ownership/tax rules, and how lenders evaluate key person insurance in real underwriting.
Who Is a Key Person
- Anyone whose loss would materially reduce revenue, strategic capacity, lender confidence, or enterprise value.
- Not just founders—top rainmakers, technical leaders, and operators can be mission-critical.
How to Size Coverage
- Use a blend of replacement cost, profit contribution, debt exposure, and disruption duration.
- For financed businesses, coordinate coverage with lender requirements and covenant risk.
- Recalculate annually as concentration risk shifts.
Ownership and Tax Basics
- Business ownership is common because proceeds are intended to support business continuity.
- Document consent and notice procedures correctly before issue to avoid tax complications.
- Integrate with broader succession documents so cash and control move together.
Best Practices
- Use policy reviews to align amount, product type, and premium strategy with current company economics.
- Pair key person planning with continuity playbooks and role transfer protocols.
Build a coverage plan that actually survives real life.
Use the short form to get a practical policy direction based on your goals, budget, and risk tolerance.