What type of insurance policy protects a business from financial loss due to the death of an essential employee?

Key person insurance is specifically designed to protect a business from financial losses that may occur due to the death of an essential employee, often referred to as a key person or key employee. This type of insurance provides the business with a death benefit that can help cover costs associated with the loss of the employee, such as recruiting and training a replacement, losing client relationships, or potential dips in revenue.

The policy is owned by the business, and the business is also the beneficiary. This means that if the key employee passes away, the business will receive the payout, which can be essential for maintaining operations during a challenging time. It serves to stabilize the business and provide the necessary funds to navigate the transition without severe financial strain.

In contrast, group life insurance typically covers a group of employees under a single contract, and while it provides benefits to designated beneficiaries, it may not specifically address the business’s unique role or needs during the death of a key person. Term life insurance is designed to provide coverage for a temporary period, generally without accumulating cash value, and may not be suitable for the unique needs of a business regarding key personnel. Whole life insurance provides lifelong coverage with a cash value component but does not specifically address the protection of a business from the loss of a