What are the differences between key person insurance and life insurance?

There are two main types of life insurance for business owners: key person insurance and life insurance. Key person insurance is insurance that is taken out on a key employee or owner of the business. The death of this key person would have a significant financial impact on the business, so the key person insurance is designed to help the business financially survive in the event of their death. Life insurance, on the other hand, is insurance that is taken out on the business owner themselves. In the event of the business owner’s death, the life insurance policy would provide financial protection for their family.

In this article:

Key Person Insurance vs. Life Insurance: What's the Difference?
How to Choose the Right Life Insurance for Your Business

Key Person Insurance vs. Life Insurance: What's the Difference?

There are several key differences between key person insurance and life insurance.

First, key person insurance is designed to protect a business in the event of the death of a key employee, while life insurance is designed to protect an individual and their family in the event of the death of the policyholder. Key person insurance is designed to help a company financially while they search for a replacement who brings the lost knowledge and skills of the key person.

Second, key person insurance typically has a much higher death benefit than life insurance, as it is designed to cover the loss of revenue for a business in the event of the death of a key employee.

Finally, key person insurance policies are often much more expensive than life insurance policies, as they are designed to cover a much larger financial loss.

How to Choose the Right Life Insurance for Your Business

There are two main types of life insurance for business owners: key person insurance and life insurance. Key person insurance is insurance that is taken out on a key employee or owner of the business. The death of this key person would have a significant financial impact on the business, so the key person insurance is designed to help the business financially survive in the event of their death.

Life insurance, on the other hand, means that in the event of the business owner’s death, the policy would provide financial protection for their family.

There are a few key factors to consider when purchasing life insurance for your business. The first is the size of your business and your financial needs. You will want to make sure that the life insurance policy you purchase is large enough to cover the financial needs of your business.

The second factor to consider is the type of business you have. If your business is dependent on one key person, then key person insurance may be a better option for you. If your business would be able to continue without the key person, then life insurance may be a better option.

The third factor to consider is the cost of the life insurance policy. Key person insurance policies can be more expensive than life insurance policies, so you will want to make sure that you can afford the policy you purchase.