Protecting Your Business with Key Person Insurance: Why It’s Critical to Your Continuity Plan

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If you’re a business owner or executive, you already know how crucial certain individuals are to your company’s success.

But have you ever asked yourself:

“What would happen to the business if one of those people suddenly couldn’t work due to death or disability?”

Key Person Insurance exists to answer that uncomfortable, yet essential, question—and protect the company you’ve worked so hard to build.

Understanding Key Person Insurance

Key Person Insurance is a life and/or disability insurance policy that a business purchases on the life of an essential team member. The business owns the policy, pays the premiums, and is the beneficiary. If the insured key person dies or becomes disabled, the business receives a tax-free payout, helping to offset financial losses, cover recruitment costs, or maintain operations during the transition.

Unlike personal life insurance, the purpose of Key Person Insurance is not to protect the individual’s family—it’s to protect the company. This coverage provides a financial cushion during a period of disruption, helping the business remain stable and solvent.

Who Qualifies as a “Key Person”?

Not every employee qualifies as a “key person.” In general, it includes anyone whose skill, knowledge, or leadership is central to revenue, client retention, or strategic operations. Common examples include:

• Founders and Co-Founders

• CEOs and CFOs

• Top Sales Producers

• Lead Engineers or Developers

• Partners in law, accounting, or medical practices

If the sudden absence of a person would materially affect your company’s operations or valuation, they likely qualify.

Real-World Pain Points

Many business owners underestimate how fragile their operations can be. Here are just a few challenges businesses face when a key person is lost unexpectedly:

• Loss of Revenue: Sales may stall or client confidence may waver if the face of the company or top producer is gone.

  
  

• Delayed Projects: Product development or service delivery may slow if technical experts or strategists are no longer available.

  
  

• Leadership Vacuum: A sudden loss of leadership can trigger internal confusion or external doubt from customers, investors, or lenders.

  
  

• Costly Recruitment: Replacing high-caliber talent is expensive and often takes months, if not years.

Despite these risks, many businesses don’t proactively plan for this contingency—leaving their entire operation exposed.

Why It Matters for Your Succession and Continuity Plans

Whether you’re aiming for a business exit, bringing on investors, or simply planning for the future, Key Person Insurance strengthens your company’s value and resilience. Here’s how:

• It ensures that financial stability can be maintained during a transition.

  
  

• It signals to lenders and investors that you’ve mitigated a critical risk.

  
  

• It supports continuity of service and relationships for clients and vendors.

  
  

• It may be required in partnership agreements, financing covenants, or investor due diligence.

In many ways, Key Person Insurance isn’t just a financial tool—it’s a strategic one.

How Dominion Insurance Advisors Can Help

At Dominion Insurance Advisors, we specialize in guiding business owners and professionals through the complexities of business protection and succession strategies. We don’t just sell policies—we help you think through:

• Who your true key people are

  
  

• How much coverage is appropriate

  
  

• Whether life insurance, disability insurance, or both are needed

  
  

• How to integrate this into your larger continuity, exit, or estate plan

We’re here to help you safeguard what you’ve built with wisdom, diligence, and clarity.

Secure Your Business’s Future Today

You’ve invested too much into your business to leave it vulnerable to the unexpected. Let’s identify your key people and design a strategy that keeps your business stable—no matter what happens.

Secure a time with us here.

Let’s make sure your business is prepared—for the future you’re planning, and the one you can’t predict.

*Dominion Insurance Advisors LLC is an Arizona-licensed insurance agency. License #3003248512. All information is for educational purposes only and should not be considered a guarantee of coverage, rates, or eligibility. Not intended as tax, legal, or financial advice. Please consult qualified professionals—insurance, financial, tax, legal, or other advisors—as appropriate, for guidance tailored to your specific needs.