DEFINITION of 'Key Person Insurance'

A life insurance policy that a company purchases on a key executive's life. The company is the beneficiary of the plan and pays the insurance policy premiums.

Also known as "key man insurance," "key woman insurance" or "business life insurance."

BREAKING DOWN 'Key Person Insurance'

Key person insurance is needed if the sudden loss of a key executive would have a large negative effect on the company's operations. The payout provided from the death of the executive essentially buys the company time to find a new person or to implement other strategies to save the business.

RELATED TERMS
  1. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  2. Annual Renewable Term (ART) Insurance

    A form of term life insurance that offers a guarantee of future ...
  3. Insurance Industry ETF

    A sector-following fund that invests primarily in insurance companies, ...
  4. Insurance Premium

    The amount of money that an individual or business must pay for ...
  5. Term Life Insurance

    A policy with a set duration limit on the coverage period instead ...
  6. Decreasing Term Insurance

    A type of annual renewable term life insurance that provides ...
Related Articles
  1. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  2. Insurance

    4 Things That Keep You From Getting Life Insurance

    We look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
  3. Insurance

    Term Life Insurance: Everything You Need to Know

    Term life insurance is an affordable way to financially protect your loved ones after your death. Here's what you need to know before purchasing a policy.
  4. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  5. Insurance

    What's Better: Whole Life or Term Insurance?

    Life insurance can be a difficult decision to make, especially for a young adult. Here's a look at the benefits and costs of getting whole life insurance.
  6. Insurance

    Life Insurance: How Long Does It Take To Get Paid?

    How to file for a life insurance payout – and how long it takes to receive it. Plus, new ways to plan for payments that provide an income stream.
  7. Insurance

    Getting Your (Insurance) House in Order

    From starting a family to retirement, insurance can play a role in taking care of financial needs. This piece looks at some of the choices you can make.
  8. Financial Advisor

    How Life Insurance Can Help With Liquidity

    Life insurance can provide liquidity in personal and business situations when access to capital is essential. Learn how to utilize its unique properties.
Hot Definitions
  1. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  2. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  3. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  4. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  5. Solvency

    The ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business, but a ...
  6. Dilution

    A reduction in the ownership percentage of a share of stock caused by the issuance of new stock. Dilution can also occur ...
Trading Center