H—Key Person Insurance

Multipurpose key person insurance protects a business from the financial losses that can occur when a key employee dies. Such a key employee could be the owner of the business, or a nonowner employee whose very specialized abilities are critical to the operation of the business and difficult or costly to replace. Adequate amounts of key person insurance are essential in any risk management program.

Since the existence of business debt “signals a need for insurance,” key person insurance can function as a form of commercial loan protection, as well as provide needed funds when a business is to be continued, sold, or liquidated.