Key Person Insurance

Key Person Insurance

A life insurance policy a company purchases on one or more of its most important employees. The company pays the premiums and is the beneficiary. If the employee dies unexpectedly the company receives the benefit to offset the financial loss from the employee's demise. Partnerships often have key person insurance on each of the partners, while publicly-traded companies carry policies for major executives and managers. Companies use key person benefits to buy back stock in the company from the decedent's estate. It is also common to use the benefit to offset lost production or to pay a headhunter to find a replacement employee.