Key person & business life insurance
Protect the business
behind the people.
The loss of an owner or key employee can affect revenue, operations and ownership. Build coverage around the financial impact and the agreement it needs to support.
Different goals, different arrangements
Keep the purpose of each policy clear
Operating continuity
Key person coverage
A business typically owns the policy and receives the benefit after a covered death. Proceeds can help with lost revenue, recruitment, debt or operating costs.
Ownership transition
Buy-sell funding
Life insurance may provide funds for a purchase required by a buy-sell agreement. Cross-purchase and entity-purchase arrangements have different ownership and tax consequences.
Financing
Lender requirements
A lender may request life insurance and a collateral assignment. Confirm the required amount, insured people and assignment terms with the lender early in the process.
Start with the exposure
Use business facts to guide the amount
| Purpose | Bring to the review | Revisit when |
|---|---|---|
| Key person protection | Bring to the reviewRevenue dependency, replacement costs and expected recovery time. | Revisit whenA key role, customer concentration or staffing changes. |
| Buy-sell funding | Bring to the reviewThe signed agreement, current valuation and ownership percentages. | Revisit whenOwnership, valuation or the agreement changes. |
| Loan protection | Bring to the reviewThe lender’s written insurance requirements and loan details. | Revisit whenDebt is refinanced, repaid or increased. |
Before the policy is issued
Coordinate ownership, consent and tax review
The policy owner, beneficiary and any collateral assignee should match the intended arrangement. A key person policy does not automatically fund the right party’s buyout obligation.
Employer-owned life insurance can be subject to federal notice, written-consent and reporting requirements. Certain requirements must be satisfied before coverage is issued. Have your attorney and tax adviser confirm the applicable rules.
Buy-sell structures can also affect business valuation and estate-tax outcomes. Review the agreement and insurance together.
What we help with
- Compare policy types and carrier requirements
- Review coverage amounts and premium options
- Coordinate insurance details with your advisers
- Review policies after business changes
Common questions
Business coverage, explained
Is key person insurance the same as employee life benefits?
No. Key person coverage is generally designed to protect the business. Employee group life benefits generally protect the employee’s named beneficiaries.
Should the policy be term or permanent?
Match the expected duration, agreement, budget and funding goals. There is no single product that fits every business arrangement.
Are the premiums deductible?
Do not assume they are. Tax treatment depends on the arrangement, including who owns the policy and benefits from it. Ask your tax adviser before treating premiums as a deduction.
Can this replace a buy-sell agreement?
No. Insurance can help fund an agreement; it does not establish the purchase terms, valuation method or legal obligations. Your attorney should prepare or review those terms.
Explore your options
More life insurance guides
Washington Insurance Brokers
Let’s put the details together.
Build a business coverage plan
Bring your planning questions, existing policies and any lender or ownership requirements.
Quotes are estimates, not a guarantee of coverage. Eligibility, premiums, benefits and exclusions depend on the insurer and policy. Review the issued contract and any underwriting requirements. Information reviewed September 19, 2026.
Resources: IRS: employer-owned life insuranceIRS: employer-owned policy guidanceNAIC life insurance buyer’s guide