This is a business-specific life insurance that can compensate a company for the financial loss and other consequences of the death of an important member of the business who has a unique and hard to replace skill set such as Intellectual Property that is vital to the organization. For example, the person could be a director of the company, a partner, a key sales person, key project manager, or someone with specific skills or knowledge which is especially valuable to the company.
You can take out Key Person Insurance at any stage of your company's lifetime. You will pay a premium on a regular basis, based on the cover that is required. If the unexpected happens and this person dies, or becomes seriously ill, the policy will provide a lump sum to compensate for this event. This can be used to offset any financial losses incurred. It can also be used to contribute to bank loans where the key employee gave a personal guarantee, or to pay off loans made to the company by the key employees. The policy's term does not extend beyond the period of the key person’s usefulness to the business.