The sustainability of a small business often depends on the performance of a key employee. Small business clients need protection against the loss of this person. Help these clients protect their business with key person insurance.

How this plan works

With this type of solution, the business buys a life insurance policy on the key employee and pays the premiums. If the key person passes away, the business receives the policy's death benefit to help recover lost income or to cover costs while recruiting and training a new employee.

Diagram of how key person insurance works during the lifetime of key person: The business buys a life insurance policy on the key employee and pays the premiums.
Diagram of how key person insurance works at death of the key person: If the key person passes away, the business receives the policy's death benefit.

Potential benefits of the plan

  • The tax-free policy proceeds cover financial losses that may occur at the death of a key person
  • Other executives, customers and creditors are assured of business continuity
  • The life insurance policy remains a business asset that enhances their business' creditworthiness for commercial borrowing purposes
  • The key person's value to the business is affirmed, strengthening the existing relationship and increasing retention
  • The policy's cash value may be available to the business through a withdrawal or loan if needed for business opportunities or retirement benefits


Share this brochure with your clients to help them understand how key person insurance can be helpful in protecting against the loss of the business owner or a key employee.


Have small-business clients but don’t know which life insurance solution is right for their business? Answer a few questions and get a recommendation from the Nationwide Small Business Solutions Analyzer.

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As situations change, so will the business's life insurance needs. Care should be taken to ensure these strategies and products are suitable for the business's and the client's long-term goals. Weigh the business's objectives, time horizon and risk tolerance as well as any associated costs before investing. Also, be aware that market volatility can lead to the possibility of the need for additional premium in the policy. Variable life insurance has fees and charges associated with it, which include costs of insurance, underlying fund expenses and administration fees. Investing involves risk, including possible loss of principal. Nationwide and its representatives do not give legal or tax advice. An attorney or tax advisor should be consulted for answers to specific questions.

Variable life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as gender, health and age, underlying fund charges and expenses, and additional charges for riders that customize a policy to fit their individual needs. Variable products are sold by prospectus. You can obtain the product prospectus and underlying fund prospectuses by writing to Nationwide Life Insurance Company, P.O. Box 182021, Columbus, OH 43218-2021. Before you invest, you should read the prospectus carefully and consider investment objectives, risks, charges and expenses. The product prospectus and underlying fund prospectus contain this and other important information.

Loans and withdrawals will reduce the death benefit. Most distributions will be taxed on a first-in/first-out basis, as long as the contract is not a modified endowment contract (MEC) according to Section 7702A of the Internal Revenue Code. Loans from a MEC are generally taxable and subject to a 10% tax penalty if taken before age 59 1/2. If the policy lapses with a loan outstanding, it will be treated as a distribution and some or all of the amount may be taxable.

Guarantees and protections are subject to Nationwide's claims-paying ability. They do not apply to the investment performance or safety of the underlying investment options.

Investment products are not FDIC-insured, may lose value and have no bank guarantee.