Importance of key person insurance for small businesses

If you own a small business, your employees are often the backbone of your success. And having a plan in place, such as key person insurance, can be a valuable tool in ensuring the continuation of that business.¹

Like traditional life insurance, key person insurance offers death benefit protection and tax advantages, and it can be used to help keep your business running — even without your most valuable employee(s).

Key person insurance is a life insurance policy that a business takes out on its most valuable employee or employees. The death benefit provides funds to cover financial losses, recruit and train a replacement and stabilize the business during a transition.

Keep in mind that some lenders mandate that businesses purchase key person insurance to receive financing.

Who can be covered using key person insurance?

Key person insurance is often used to protect against the death or disability of the business’s owners. But it can also be used for employees who have a highly specialized role within the organization or who bring in a substantial portion of the total sales.

Key person insurance vs life insurance

Is key person insurance tax deductible?

Because the business is the beneficiary of a key person insurance policy, the premiums paid into that policy are not tax-deductible.² However, key person insurance does offer your small business other tax advantages, including:

Key person insurance benefits

Key person insurance can be a valuable continuation tool that can help keep your business running smoothly in the face a great loss. Speak with your financial professional or contact Nationwide today for help understanding your business’ coverage needs and the options you have to protect it.