In Key-Person Insurance, who is typically the insured?

In Key-Person Insurance, the typical insured individual is the key employee. This type of insurance is designed to protect a business from financial loss that may occur due to the death or disability of a crucial employee whose skills, knowledge, and leadership are vital to the company's success.

The policy is purchased by the business entity, which is the owner of the policy, and the business pays the premiums. However, the key employee is the one whose life is insured because their absence could significantly affect the company's operations and profitability. In this scenario, the business often acts as the beneficiary, receiving the insurance payout if the insured key employee passes away or becomes disabled. This financial support can assist the business in covering the costs associated with recruiting and training a replacement or managing any disruption caused by the loss of the key employee.