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Explained: key-person insurance

In every company, big or small, there is always that one person who brings more value than anyone else.

Maybe they bring in more sales than anyone else.

Maybe they manage all the day-to-day operations at the business.

Or maybe they handle all the administrative tasks that the owner of the business simply can't do.

In the life insurance industry, we call this person the "key-person" (I know, very creative!)

If you're a business owner reading this, take a second to think about who that key person is.

It might even be you!

Now ask yourself...

"What would happen to my business if this person was no longer able to work here?"

Key-Person Insurance

Key-person insurance is life and/or critical illness coverage purchased by a company which provides a business the funds to "get over the hump" of losing the services of a shareholder or key employee who has either passed away, or is off work dealing with a life threatening diagnosis.

The funds provided in key-person coverage can be used in any way the shareholder chooses.

For example, the shareholder can hire a temporary replacement, offset the decrease in earnings, or ramp up marketing efforts to increase sales.

A simple way to determine exactly how much coverage you need for key-person insurance, is to determine the income that was paid to the individual

For example, if the employee you're looking to insure is paid an annual salary of $200,000/year - that would be the amount of coverage needed.

This is just a framework, you can decide to purchase additional coverage.

Let's look at a scenario where key-person insurance can come in handy.


You are the owner of ABC Construction.

ABC construction is a custom home builder, with a total of 15 employees.

John is the development manager of the company, and oversees every project going on. Nothing gets done without John's approval.

You pay John an annual salary of $200,000.

Clearly, John is a crucial part to the success of ABC Construction.

You decide to purchase key-person coverage on John's life, with ABC Construction as the owner of the policy.

Two years later, John passes away suddenly from a heart attack.

You inform your insurance company about John's passing.

Next, your insurance company will issue ABC Construction a cheque for $200,000 into its bank account.

As the owner of the ABC Construction, you can now use that $200,000 to hire a temporary replacement for John.

You are protected from the loss of any key personnel, and your business can continue to run its day-to-day operations.


Key-person insurance is a great way to not only protect your business, but to also let your employee(s) know how much you value them!

To inquire about key-person insurance, or to request a quote, feel free to give me a call directly at 647-393-3474, or complete the intake form below!

Thanks for reading!





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