What is key person insurance primarily intended for?

Key person insurance is specifically designed to protect a business from financial losses that may occur due to the death or extended incapacity of an essential employee or leader. This type of insurance allows a business to maintain stability and continuity during challenging times by providing funds that can be used for various necessary expenses, such as recruiting and training a replacement or covering lost revenue.

The policy is owned by the business, and the business pays the premiums while being the beneficiary. This structure is crucial in ensuring that the business can recover from the potential downturn caused by the loss of a key employee, whose unique skills, knowledge, or relationships are vital for the company’s success. The focus is on the business aspect rather than personal or family circumstances, which makes it distinct from other types of life insurance policies aimed at individual family members or public figures.