Introduction

Every business has that one person (or maybe a few) who plays a major role in its success. Maybe it’s the founder, the lead salesperson, or the person who knows your systems inside and out. What would happen if they suddenly couldn’t work due to illness, disability, or worse? It’s not a fun scenario to think about—but it’s a necessary one. That’s where key person insurance comes in. It’s a practical and effective way to protect your business if the unexpected happens.

What Exactly Is Key Person Insurance?

Key person insurance is a life or disability insurance policy a business takes out on someone critical to its operations. The company pays the premiums and is also the beneficiary. If that person passes away or becomes unable to work, the business receives a payout to help soften the financial blow.

Why It Matters More Than You Think

1. Helps Keep the Business Running
Losing a vital team member can slow operations or even pause them entirely. A key person policy gives you breathing room—time and money to regroup and move forward.

2. Covers the Cost of Replacing Key Talent
Replacing a high-level employee takes time and resources. Key person insurance can help cover recruiting fees, training costs, and even temporary staffing.

3. Keeps Lenders and Investors Confident
Many lenders and investors view key person coverage as a sign of smart planning. In fact, some won’t offer funding without it. It shows that you’re protecting the company—and their investment.

4. Maintains Business Value
Losing a key person can impact client relationships, product development, or sales momentum. Having financial support during that transition helps you preserve the company’s value and reputation.

Who Counts as a “Key Person”?

A key person is anyone whose absence would create a noticeable gap in the business. That might include:

• The founder or CEO
• A top-performing salesperson
• A technical expert with specialized knowledge
• Anyone who’s critical to daily operations or long-term growth

How Much Coverage Do You Need?

There’s no one-size-fits-all answer here. It depends on how much the person contributes to the business and how much it would cost to replace them or recover from their loss. A financial advisor can help you work through the numbers to find the right amount.

How to Get Started

1. Identify Your Key People
Make a list of individuals whose loss would have a significant impact on the business.

2. Talk to an Insurance Advisor
A trusted advisor can help you find the right policy, figure out coverage needs, and make sure it fits into your broader business strategy.

3. Review It Regularly
As your business grows and your team evolves, your key person insurance should be updated to match.

Conclusion

Key person insurance isn’t something most business owners think about until it’s too late—but it’s one of the smartest moves you can make to protect your company. If you rely on one or two people to keep things running smoothly, losing them suddenly could be devastating. A key person policy gives your business a financial safety net—and the time it needs to recover.Want to learn how this fits into your overall business planning strategy? Contact Innovative Legacy Solutions today. We’ll walk you through your options and help you protect the business you’ve worked so hard to build.