Key Person Insurance vs. Life Insurance: What’s the Difference?
In business, every employee is important – but some employees are essential. As a business owner, you have options when it comes to purchasing life insurance. You can provide policies to all employees, but there is more you can do. But what policies should you get key man insurance vs life insurance
Key person insurance and life insurance are both types of insurance that can provide financial protection for families and businesses.
Some key differences between the two types of insurance:
Key person insurance is a type of life insurance that is designed to protect a business from the financial loss that could occur if a key employee dies or becomes disabled. The death benefit from a key person insurance policy can be used to replace the lost income of the key employee, or to pay for the cost of hiring and training a replacement.
Life insurance is a type of insurance that provides financial protection for the family of the insured person in the event of their death. The death benefit from a life insurance policy can be used to pay for funeral expenses, outstanding debts, and other financial obligations.
Key Person Insurance vs. Life Insurance
| Feature | Key Person Insurance | Life Insurance |
|---|---|---|
| Purpose | Protects a business from financial loss | Protects the family of the insured person |
| Beneficiary | Business | Family of the insured person |
| Death benefit | Can be used to replace lost income, pay for hiring and training a replacement, or other business expenses | Can be used to pay for funeral expenses, outstanding debts, and other financial obligations |
| Premiums | Paid by the business | Paid by the insured person or their beneficiary |
Which type of insurance is right for you?
The best type of insurance for you will depend on your individual circumstances and needs. If you are a business owner, key person insurance may be a good option to protect your business from financial loss. If you are concerned about providing financial protection for your family in the event of your death, life insurance may be a better choice.
- Key person is typically more expensive than life insurance because it is designed to protect a business from financial loss.
- The death benefit from policy can be used for any purpose, but it is typically used to replace the lost income of the key employee.
- The death benefit from a life insurance policy can be used for any purpose, but it is typically used to pay for funeral expenses, outstanding debts, and other financial obligations.
