What type of coverage do most key person insurance policies provide?

Key person insurance policies are designed to protect a business from the financial impact of losing a vital employee, often referred to as a key person. These policies typically provide long-term life coverage. The rationale behind this is that the coverage needs to meet the potential long-term financial losses that the business may face if the key individual were to pass away.

The business relies on key individuals for their unique skills, relationships, or insights, and losing them can lead to reduced sales, continued operational costs, and other financial burdens. By having long-term life coverage, the policy ensures that the business has the necessary funds to hire a replacement or to support the company during the transition period after the loss of the key person. This type of coverage is typically structured to last long enough to provide sufficient support for the business's recovery and stability.