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Key person insurance is simply life insurance on the key person in a business. In a small business, this is usually the owner, the founders or perhaps a key employee or two. These are the people who are crucial to a business–the ones whose absence would sink the company.

Life and/or disability insurance on one (or more) key persons whose loss or unavailability may cause loss of profit, goodwill, or increase in expenses. These insurance policies help finance the search and training of a successor, or compensate for fall in profits. Also called key employee insurance.