In a life insurance policy, who is typically considered the beneficiary of a key person?

In a life insurance policy designated for a key person, the employer is typically considered the beneficiary because the policy is intended to protect the business against the financial loss that can occur due to the untimely death of an important employee whose skills and contributions are vital to the company’s success. This type of insurance is often arranged by the employer to ensure that the business can manage any potential disruptions, secure financing, or fund a buy-sell agreement if necessary.

The funds from the policy can help cover costs such as recruitment and training of a replacement, or managing debts and obligations that might arise after the loss of the key individual. This dynamic highlights the main aim of key person insurance, which is to safeguard the company’s financial stability rather than providing support to personal beneficiaries like family members or partners.