Key Person Insurance
Life insurance owned or funded to help a business absorb financial loss after the death of an important employee or owner.
Why it matters
Ownership, beneficiary, consent, coverage amount, and business purpose need to be aligned and documented.
Where you may see it
Board resolution, application, ownership and beneficiary records, business valuation, and tax advice.
What to verify
Business loss estimate, owner and beneficiary, employee consent, premium payer, tax treatment, and review after role changes.
Do not confuse it with
Buy-sell funding, which is designed to finance an ownership transfer.
Read Key Person Insurance in context
Start with the exact sentence where the term appears, then read the definition, schedule, and any referenced rider together. The practical concern is this: Ownership, beneficiary, consent, coverage amount, and business purpose need to be aligned and documented. Locate the relevant records—board resolution, application, ownership and beneficiary records, business valuation, and tax advice.—and compare them with the issued contract rather than a sales summary.
Before signing, changing coverage, or making a claim decision, record the points that control the result: Business loss estimate, owner and beneficiary, employee consent, premium payer, tax treatment, and review after role changes. If another policy uses similar wording, do not assume it has the same effect.
Keep the dated page or form with your notes. If the definition changes the benefit, premium, ownership rights, or a deadline, ask the issuing insurer for a written explanation tied to the policy number.
Reliable places to check
- Your issued policy and application copy.
- NAIC consumer life insurance resources.
- Your state insurance department for licensing and consumer help.