Protecting Your Business with Key Man Insurance

If you own or operate a business, then protecting it with key man insurance could make the difference between keeping the company running, or having to shut it down.

Let’s find out how to make sure that does not happen to you.

What is Key Man Insurance?

Key man insurance is a type of coverage that pays a benefit if a key individual – such as a business owner, partner, or top sales representative – dies or becomes disabled and is no longer able to work.

This type of coverage can cover the loss of income, as well as provide funds for resulting expenses that may be incurred if a key individual becomes disabled or passes away.

What Does Key Man Insurance Cover?

A key man insurance policy – which is also often referred to as key person insurance – can provide the funds that are needed to keep the business afloat while a suitable replacement or purchaser is found.

Key man disability insurance and / or key man life insurance coverage may be purchased as well. Sometimes these can be added as a rider to the policy.

Why Buy Key Man Insurance?

There are many reasons why purchasing key man insurance can be beneficial for a business. First, the loss of an owner, founder, or top-producing sales rep can have a substantial impact on the overall incoming revenue of the company.

This is particularly the case in a small or medium sized business – and in some instances, the loss of the key person could even mean that the continuation of the company is at stake.

Likewise, losing a key person to death or disability could also mean that customers may choose to take their business elsewhere.

Key man insurance can also help with funding a buy-sell agreement so that the remaining owners or partners will have the funds that are necessary for buying out the disabled or deceased individual’s share. Without this funding, though, it could be necessary to sell the company, or for the company to go out of business.

If your company relies on (or will rely on in the future) loans or other financings to grow, the loss of a key individual can be a factor in whether or not the company is approved. But with key person insurance, the risk to the lender can be greatly reduced.

How Much Key Man Insurance Should You Have?

At an absolute minimum, it is important to insure the cost of losing and replacing the key individual. Some factors to consider here include the amount it would cost to replace the key individual, as well as his or her contribution to the business.

On the other hand, there is typically a maximum amount of key person insurance that can be purchased. With most insurance carriers, this amount is typically between five and ten times the insured’s salary.

Is Term or Permanent Life Insurance Better for Key Person Coverage?

There are two primary types of coverage that can be used for key person life insurance. These are term and permanent. Term life offers pure insurance protection only, while permanent life insurance provides death benefit coverage and cash value.

Typically, due to its simplicity, term life insurance offers a more affordable premium. And, while this type of insurance has an “expiration date,” term insurance can usually be locked in for 20, or even 30 years.

In addition, because the key person may leave the company in the future, having term life insurance coverage will provide the financial protection that the business needs without a large premium cost outlay.

Structuring a Key Man Life Insurance Policy

With key person life insurance, the business will typically purchase the policy and pay the premium. The business is also named as the policy’s beneficiary. That way, if the insured passes away while the policy is in force, the company will receive the policy’s proceeds.

Key man insurance

Best Key Man Companies

There many insurance companies that offer key man coverage. Some of the best key man insurance companies include:

Although there are a number of very good carriers that offer key man life and disability insurance coverage, the best company is the one that provides the protection and the premium that best fits your business’s needs.

Working with an independent insurance carrier can provide you with the option to choose from many different carriers. Insurance Geek is associated with more than 30 insurers. We’ll help you to narrow down the one that is right for you and your business.

How to Get the Best Quotes

When getting quotes for key man insurance, it is best to work with an independent insurance professional or agency. That way, you won’t be locked into what just one single insurance company can offer you.

At Insurance Geek, we work with more than 30 of the top rated insurance companies. So, we can go out into the market and find the coverage that will best fit your specific coverage needs, as well as your budget.

In addition to finding you the best quote on key man insurance, we know which insurance companies require strict underwriting, and which ones don’t – and because of that, we can oftentimes place insurance policies on those who have various health conditions. Not all insurance providers can say that!

And, due to our many years of experience in the insurance industry, we can also work with you step-by-step in completing the application and providing any additional information that the insurance carrier needs from you.


If you own or manage a business, it’s likely that you have spent a great deal of time – including working nights, weekends, and holidays – building the company up to where it is today.

So, why take a chance on losing revenue, or even losing the company altogether, if your key people aren’t protected?

When it comes to protecting your business from the loss of a key person due to death or disability, Insurance Geek has already done the shopping for you.

So, if your business would suffer a significant financial setback upon losing an owner, partner, or other key individuals, contact Insurance Geek today to put the right protection in place.


If the company pays the premium for key man insurance, the business can claim a deduction for the premium as a business expense.

The cost of key man insurance can be based on a number of factors. These include the insured’s age, gender, and health condition, as well as the amount of insurance coverage,  is purchased. Just like with individual life insurance and disability insurance coverage, the older the insured is, the higher the premium is likely to be.

There are other criteria that also factor in the cost of life insurance. For example, the industry – and in turn, the amount of risk that the insurance company has to take on – is considered. In this case, the premium will typically be higher for insureds who work in more “dangerous” occupations. This is due to the higher risk of premature death or disability.

Likewise, the size and structure of the company will also play a major role in the calculation of the key man insurance premium. Here, for instance, the more the business relies on the insured for revenue and / or other contributions, the higher the premium is likely to be for the coverage.

In some cases, key man insurance can be transferred from one executive to another. Also, if a key individual leaves the business, he or she may be able to continue the coverage (as long as they continue making the premium payments).

One of the primary reasons for purchasing key man life insurance is to fund a buy sell agreement. In this case, if the insured / key person passes away, the death benefit proceeds from a key person life insurance policy may be used by the remaining owners or partners to buy out the deceased’s share of the company.

In addition to life and disability insurance, a company may have other alternatives available to cover the expense of losing a key individual. These could include using the personal funds of the remaining company owners or partners, using the company’s incoming cash flow, or borrowing the funds that are needed from a bank or other lender.

Unfortunately, though, all of these alternatives could be detrimental to the company’s finances. With that in mind, key person insurance can provide a cost-effective method of obtaining the necessary funds if needed and keeping other assets in place.