Situation: When the financial future of a business is dependent on the specialized skills, knowledge, or influence of a person or persons, the business should seriously consider acquiring insurance to help cover its potential loss at the death of such employee. Such insurance coverage is usually referred to as key person life insurance.
A key employee can be either an owner or an employee. What distinguishes someone as a key person is that his or her loss would severely impact a business until a replacement could be found and trained. Many businesses, especially those that are small or medium sized, depend on the skills and talents of one or more key individuals for their growth and continued success. In fact, some companies could not survive if a key employee suddenly died.