UK
IRE
AU
CA
US
ZA
NAExpert financial copywriter
Provide us with your details and one of our insurance experts will contact you to discuss your requirements
James Hyde 
V Jain 
Vivek Jain Eve Phillips Ryan Andreas Rupert Langerman Daniel Weisz 
Brandon Opie 
Jamie Petrie Chay Hamilton 
Page written by Chris Godfrey. Last reviewed on May 22, 2025. Next review due October 1, 2027.
Many small and medium-sized US businesses are owned and/or managed by just a few important people. These are usually board members, the managing director, and executive officers, but they could also be other valuable employees. Responsible for major decisions and steering the organisation’s growth and development, these individuals are the essential ingredients that no business can do without. But what happens when these central figures are suddenly missing from the scene due to sickness, disability, or death? The potential for chaos and huge financial loss may grow exponentially, putting the organisation in a spin, or even causing the businesses to cease trading.
Fortunately, this is where key person insurance can step in to fill the void. Providing necessary financial support, it can cover the financial issues, and pay for interim leadership to turn an unseen loss or tragedy into a chance to build again.
Key person insurance (KPI), also known as ‘key man insurance’ or ‘key person protection’, is a type of business insurance that protects organisations from the financial impact of the loss of a key individual – men and women – who can no longer work due to major illness, or who have passed away during the term of the policy. Effectively, the business insures itself against the financial fallout from such an event, giving employees, suppliers and customers the confidence to know that the business will survive even if tragedy should strike.
Key person insurance is a life insurance policy, (plus optional critical illness cover), taken out to cover the life of a key person within your business. The policy is owned and paid for by the employer, so any pay-out is payable to the organisation.
The insurance can cover any individual in your company, and you can usually make a claim during the length of the policy if:
Important note: You must be able to demonstrate that your business would suffer a financial loss of profits in the key person’s absence in order to insure them as a key person.
Securing key person insurance on a business’ important employees is relatively straightforward: The company purchases life insurance on certain employee(s), pays the premium, and is the named beneficiary of the policy.
In the event of the insured person’s death or incapacitation, the company receives the policy’s benefit as a cash sum. This money can be used to cover the costs of recruiting, hiring, and training a replacement for the deceased person, or, if the company believes it can no longer continue trading, the funds can be used to pay off debts, distribute money to investors, provide severance benefits to employees, and close the business down in an orderly manner. Key person insurance gives the company options other than filing for bankruptcy.
Important note: Critical illness cover can usually be added to the life policy – at extra cost – which will also pay out if the covered employee(s) are unable to continue working due to long-term illness.
Key person insurance works like any other life insurance policy – the insurer will review the health records of the individual(s) to be insured to estimate the risk of their death or incapacitation. If the person has a poor health history, it may not be possible to secure key person insurance, or the premium that’s offered may be expensive.
Key person insurance can cover the business from different types of risk. Common usages include:
This insurance offsets lost income from lost sales, or financial losses resulting from the delay or cancellation of any business project involving a key person.
The surviving shareholders or partners use the insurance funds to purchase the financial interests of the deceased person.
The value of the insurance coverage is to equal the value of the bank guarantee or the limit of the overdraft facility, protecting the lender from loss in the event of the death or incapacitation of the insured person. (Some banks may automatically ask for this type of protection before granting any loan or borrowing facility).
Key person insurance can be used to cover the life of the business owner, top executives, or any other individual considered vital to the business.
Tragedy can strike without warning, so if your business is growing and its success and future stability are centred on the performance of just a few individuals, you should take out key person insurance sooner rather than later.
Keep in mind that start-ups and small businesses are particularly vulnerable to the loss of key individuals, but even larger businesses can run into trouble if important people suddenly vanish from the scene. Simply ask yourself, what would happen if those individuals were no longer working in the business. Could you cope, or would it be a problem? If your answer is the latter, then key person insurance is right for you.
Most business success is based on stability – maintaining a steady growth trajectory without too many bumps and dips. This means reducing risk and having a financial backstop in the event of unexpected problems. If your business is heavily dependent on the performance of a few individuals, and their loss would impact profits, contracts, even loans and guarantees, you should consider key person protection to eliminate the risk.
Key person cover can be applied to any individual in the business where the loss of that person would have a major impact on the organisation’s performance. This can mean individuals from many different roles, including:
The cost of key person insurance depends on the size and nature of the business, the key person’s role, and the potential loss that may occur if they were to stop working for the company. A variety of other factors, such as the health of the key person, their gender, their age, the type of policy, and the amount of coverage you buy will also affect the premium you pay.
Top tip: The cost will also depend on whether the company buys a Term Life Policy or a Permanent Life Policy. Term Life is almost always cheaper.
All business involves risk, but that doesn’t mean you have to suffer the consequences if tragedy should strike. Contact Swoop today to discuss all your key person insurance needs. Don’t let the loss of important individuals also mean the loss of your company.
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.
Swoop promise
At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.
Find out more about Swoop’s editorial principles by reading our editorial policy.
Get your free Key person insurance quote today
Apply in minutes 
FREE no obligation, personalised quote 
Get quote 
Disclaimer: Swoop Funding LLC (“Swoop”) is a financial technology platform and commercial finance broker, not a lender. Swoop does not provide loans or make credit decisions. We match US-based firms with third-party lenders, equity funds, and grant agencies. All financing is subject to lender credit approval and the specific terms and conditions of the funding provider.
Broker Compensation Disclosure: Swoop provides its platform and matching services to applicants at no direct cost. We receive compensation in the form of a commission or referral fee from the finance providers in our network upon successful placement. This compensation may vary by provider and product. In certain instances, the commission paid to Swoop may influence the interest rate or terms offered by the lender, which can affect the total amount payable under your agreement.
Credit Authorization & FCRA Notice: By submitting an application or registering an account, you provide “written instructions” to Swoop under the Fair Credit Reporting Act (FCRA) to obtain your personal and/or business credit profile from consumer reporting agencies. This information is used solely to evaluate your eligibility for financing and to match you with appropriate lenders in our network.
State-Specific Disclosures:
Florida & Utah: Swoop complies with state commercial financing disclosure laws regarding the transparency of terms for non-real estate secured commercial transactions.
Entity Information: Swoop Funding LLC is a Delaware limited liability company. US Headquarters: 43 W 23rd St, New York, NY 10010, United States. Contact: hello@swoopfunding.com
General Terms: Applicants must be 18 years of age or older. All firms must be registered and operating within the United States. SBA loans are issued by private lenders and guaranteed by the U.S. Small Business Administration; Swoop is not a government agency. Please review our Terms of Use and Privacy Policy for full details.
If you have a complaint, please refer to our Complaints Policy.
yet? Register here!