Key person insurance is a life or disability policy a business owns on an individual whose loss would materially affect the firm, such as a founding principal or the engineer in responsible charge. The business pays the premiums and receives the benefit, which can fund recruiting, cover lost revenue or support an ownership buyout.
Why it matters for owners
Buyers, lenders and partners often ask how the firm would handle the loss of a principal, and insurance is one part of that answer alongside succession planning.
