How key person insurance can help your business
August 2022 – 15 min read
Key person insurance is insurance a company buys on the life or health of an owner or employee crucial to the company’s success
With collateral assignment, this type of business insurance can also help your company borrow money
Even if business owners have key person insurance coverage, they should also consider personal life insurance
What is key person insurance?
Key person insurance (sometimes known as key man insurance or key employee insurance) is insurance a business buys on the life or health of an owner or employee who is essential to the success of the business.
There are 3 types of key person insurance:
Let’s say you purchase a key person life insurance policy for your important sales manager. If they died, the life insurance proceeds would help you meet financial objectives in their absence and pay for hiring and training a replacement.
Critical illness insurance
With key person critical illness insurance, if your sales manager has an illness covered by the policy, it will pay a lump sum to your business to help cover financial losses or lower productivity from that person being away from work.
Key person disability insurance can benefit your business 2 ways. If your sales manager becomes disabled, it can help you to continue providing them with a salary until age 65 or they recover, whichever comes first. It can also help you continue paying office expenses and salaries during the time of the disability.
Now that you understand more about key person insurance, you may want to contact your advisor to:
Determine your business and personal insurance needs
Discover how life insurance fits into your financial plan
The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.