Key Person Insurance What is Key Person Insurance? Key person Insurance protects the business from the loss of a key employee. The company purchases and owns a life insurance policy on a key employee. The life insurance policy will provide the company with the liquidity needed to help keep the business running in the event of a premature death. The insurance provides the cash needed to hire a qualified replacement and/or to purchase the additional human capital or assets necessary to keep the business operating. The insurance may also help to replace lost profits. Most small business owners work very hard to make their companies successful, however, this dedication can become a double-edge sword. Small businesses can become so dependent on their key employees that an unexpected death or disability can threaten the survival of the company. Even and expected event, such as retirement of a key person in the business can cause difficulties, unless the proper planning has been done. In order for a business to succeed, key person insurance should be part of the plan.