Jeff is a well-known speaker and expert in life insurance and financial planning. He has been featured and quoted in Nerdwallet, Bloomberg, Forbes, U.S. News & Money, USA Today, and other leading finance websites. He is a licensed life insurance agent and has helped over 3000 people secure life insurance. He is licensed in all 50 states & DC. Jeff has spoken at top insurance conferen...

Full Bio →

Written by

Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

Full Bio →

Reviewed by Benji Carr
Former Licensed Life Insurance Agent Benji Carr

UPDATED: Oct 14, 2020

Advertiser Disclosure

It’s all about you. We want to help you make the right life insurance coverage choices.

Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider.

Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from top life insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.

If you own a business, whether it be a large corporate entity or smaller scale business endeavor, then you have life insurance needs. In the same way that a whole life insurance policy financially protects beneficiaries, business owners like you have to proactively protect the continued sustainability, viability and profitability of your business. Especially if the continued success of your business is determined by one employee’s talents, ideas, recipe, blueprint or skill set.

A lot of businesses have a vital, linchpin and irreplaceable employee known as the key man employee. A key man employee loss could mean suspension of business operations, a labor intensive search for a replacement employee and a strategic restructuring of the original business model. The loss of a vital employee can end a business. So businesses and business owners who employ irreplaceable employees need to make legal and policy preparations as soon as possible to safeguard and assure continuous business operations.

The death, firing or removal of just one integral employee whose contributions make the company viable can adversely affect everyone who works for the company.

Don’t let that happen. Become professionally and legally prepared for any eventuality and contingency. Get a key man life insurance policy today!

We keep instant and constantly updated carrier rates and quotes for numerous insurance companies that specialize in underwriting key man life insurance policies. Just enter some basic information in the carrier rate quote estimator to get instant quotes. Then contact us so that we can pair you to a key man life insurance plan to address and satisfy your needs.

So What is a Key Man Life Insurance?

The key man or key person is an employee whose input, talents and contributions are integral to the success and continued operations of the company.

  • The key man is an employee whose role in the business is necessary for its financial success and future.
  • The key man’s job presence and job skill set may be the business model which enables the hiring and employment of all of all the other employees.
  • It may be the key man’s ideas which impresses and retains the good will and continued cooperation of a board of financial investors.
  • In a restaurant based business, the key man employee may have created the recipes that are used to make and represent the signature meals and dishes of the restaurant. In a fashion-based business, the key man employee is the person responsible for sketching and designing all of the clothing line. In a video game company, the key man is the one individual responsible for all of the character designs, computer algorithms or development of intellectual properties.  So what would happen to the business if the key man, the one employee whose talents is what the business is built and operated on, died, was fired, became disabled, retired, quit or was employment poached by the competition?

Enter your ZIP code below to compare cheap life insurance rates.

secured lock Secured with SHA-256 Encryption

The Case for Key Man Life Insurance

Key man life insurance exists to help business owners proactively protect their business concerns and the future profitability of their business by insuring their business against the possible loss of the key man.

  • Key man life insurance policies proactively act as a monetary buffer protecting the continued prosperity of the business against the possible loss of the key man.
  • The business owner owns the insurance policy which would list the key man employee as the insured. In the event of the death or loss of the key man employee, the business effectively becomes the beneficiary of the designated key man.
  • The actual key man employee can be listed as the key man employee in the policy, but technically, any employee can be designated as the key man.
  • The business owner is the one who has to regularly pay premiums.
  • The financial benefits from a key man life insurance policy can be used to locate, hire and train a new employee.
  • Insurance payouts can be used to compensate the business if a business project is left unfinished by the loss of the key man results in lost revenue.
  • The cash value worth of the key man life insurance policy can be leveraged by the business owner against business loans and financial withdrawals.
  • Business loans can be taken out to keep the company afloat, pay and train new employees or for the use in business operations restructuring.
  • The key man employee designation does not result in any benefits or payments for the designated key man or familial relations of the key man. The key man has to volunteer to sign up for such coverage for the sake of the business. The family of the designated key man does not receive any death benefits if the designated key man employee actually dies.
  • Key man life insurance is not a personal life insurance policy. Each employee should be insured by an independent or group life insurance policy of some kind. Key man life insurance is a business life insurance policy that is owned and paid for by the business owner for the sake of the business only. Key man life insurance is designed to protect the financial interests and continued sustainability of business and the job security of its employees only.

Do You Need Key Man Insurance?

If you own a business that is dependent upon the skills of a key man, then you should ask yourself what would happen to your business if you lost that employee.

  • As a business owner ask yourself: Is the key man a replaceable employee? How much time and effort would it take to locate, hire and train a new employee with skills comparable to that of the lost key man?
  • What percentage of revenue, directly or indirectly, is contributable to the talents of the key man?
  • If you hired an untrained person to replace the key man, how long would it take the new employee to develop similarly efficient talents? How long would the training process for the key man employee replacement actually take?
  • Is a replacement employee going to demand more in compensation than the outgoing key man? How much of a learning curve is going to be involved in the training of the key man replacement employee?
  • What types of mistakes would a key man replacement employee make in a probationary work period? And how much in lost revenue would those mistakes cost a business already trying to recover from lost revenue due to the loss of the key man?
  • How damaged would general work morale be due to the loss of the key man?
  • If a key man left the business and took clients, resources, business connections and key investors with them, how would you cope?
  • What consequence would the loss of a key man have on the financial standing, credit rating or current interest rate for the business?
  • Do your projected future earning profit reports reveal diminishing returns and loss of finances due to the loss of the key man?

Free Life Insurance Comparison

Enter your ZIP code below to compare cheap life insurance rates.

secured lock Secured with SHA-256 Encryption

How Much Key Man Life Insurance Coverage Do You Need?

Deciding exactly how much key man life insurance coverage is sufficient to your needs depends on the unique needs and responsibilities of each business owner.

Be sure to make hard considerations about your business needs before you take out key man life insurance. Consider:

  • A lot of life insurance companies may allow you to purchase a policy equivalent to 10 time the value of the key man’s annual salary. Assess and discuss your needs with your insurance company or agent.
  • Calculate how much in revenue and profits would be lost or have to be replenished through the probable loss of the key man employee.
  • What would be the calculated loss to the overall value of the business? Can you calculate the loss of brand name strength?
  • How much would it cost to replace revenues and profits lost due to the loss of the key man employee? How much time and work hours would it take to recoup such lost revenue?

What Type of Life Insurance Should You Base on a Key Man Policy?

Term life insurance would be the most easily attainable form of insurance to get for key ma purposes. It is also extremely affordable, as term life insurance is relatively a lot cheaper than most other kinds of insurance. But term life insurance is only active for a pre-set number of years. Also the business owner would only qualify for death benefit payments, which may not be enough to cover the related costs and consequences contributable to an existing key man.

It might be worth your while to consider some variation of permanent or whole life insurance. The coverage would last and extend with the business life of the company. Also, certain variations of permanent life insurance, like index universal life insurance, universal life insurance and whole life insurance for example, offer business owners much more controllability, adjustability and fluidity in terms of available policy options.

Whatever you decide, make sure that you are purchasing key man life insurance policy coverage that will cover all of the needs of your business, or as much as possible.

The Bottom Line

Key man life insurance is a policy lifeline that can save your business when the threat of key man loss occurs.

What type of coverage does your business need? How much coverage is right for you? How can you assess the efficiency of protecting your businesses with such a policy purchase? You should not make such decisions lightly or on your own.

Get in touch with us today so that we can pair you up with a key man insurance policy specialist who will help you get all of the coverage that you need.

Don’t leave the future success and sustainability of your company entirely in the hands of chance, fate or a key man employee.