What Happens if Your Business Loses its Leader?


If you go unprotected, the death of your company’s leader could well mean the death of your company itself. There is a type of insurance that can help protect against the consequences of a tragedy like this. It is called key person insurance.

Key Person Insurance

Key person insurance is a type of life insurance that is designed not to protect your family, but to protect your business operation in the event of its leader’s – or a top employee’s – death. The company is the beneficiary on the policy, and the benefits can provide funds to help hire an individual or individuals to perform the duties that the key employee once did. It can also help in the event that your business does need to cease operations. 

Crucial Operations Stop

Especially in small businesses, much of the work that keeps the company running is performed by the owner or another leader. This includes tasks such as keeping the books, payroll, handling important accounts or customers, and more. If your business leader were to die suddenly, there might not be anyone who can step in to perform these duties. As the owner or leader, the individual often does the job of several people. For that reason, the remaining employees may feel the need to hire several new people to perform the jobs that the business owner used to do. But where will you find the funds for this? That is where the benefits from the key person policy come in.

Your Business Closes

The business could also face closure after its leader dies. Sometimes this is unavoidable. If your business relied heavily on the work of it leader, and the leader not only did things no one else could, but also knew information no one else did, it is possible that your best option is to close the business. In these situations, the death benefits from the key person insurance can be used to pay off debts, give severance to employees, and perform any other financial matters that are needed to close the company. This kind of policy can help your business to avoid declaring bankruptcy in the face of a sudden key person death.

If you care about your business, you want to make sure it either goes on after you or is able to close down with minimal losses. Speak to your agent about whether your business has the coverage it needs.