Key Person Insurance
Financial term in the Insurance category
Definition
Life or disability insurance purchased by a business on a critical employee whose loss would cause significant financial harm to the company. The business pays the premiums and is the beneficiary, using proceeds to cover losses and fund a replacement search.
Related Terms
Life Insurance
Insurance that pays a death benefit to beneficiaries when the insured person dies. Types include term life (temporary coverage) and permanent life (lifetime coverage with cash value).
Term Life Insurance
Life insurance that provides coverage for a specific period (term), typically 10, 20, or 30 years. More affordable than whole life insurance but has no cash value.
Beneficiary
A person or entity designated to receive assets from a trust, insurance policy, retirement account, or will after the owner's death.
Frequently Asked Questions
What is Key Person Insurance?
Life or disability insurance purchased by a business on a critical employee whose loss would cause significant financial harm to the company. The business pays the premiums and is the beneficiary, using proceeds to cover losses and fund a replacement search.
Why is Key Person Insurance important in personal finance?
Key Person Insurance is an important insurance concept that helps individuals make better financial decisions. Understanding Key Person Insurance can improve your financial planning and help you achieve your money goals.
How does Key Person Insurance relate to Life Insurance?
Key Person Insurance and Life Insurance are related financial concepts. Insurance that pays a death benefit to beneficiaries when the insured person dies. Types include term life (temporary coverage) and permanent life (lifetime coverage with cash value).
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