Why purchase Key Person life insurance?

Key person insurance is typically purchased by the company on behalf of the key employees of the company.

If the key person passes away, the company will receive a tax-free sum of insurance proceeds to help offset the lost employee, to hire a replacement and cover other costs that the company could suffer with the loss of a key person.

The company purchases the key person life insurance policy on an executive or someone that is vital to the operations of the business and therefore the company is the beneficiary of the policy.

This type of life insurance is sometimes referred to as: "key man insurance, key woman insurance, and/or business life insurance."