Key person insurance is coverage that will protect a company in the event of an untimely death or disability of a top salesperson, an executive, or business owner. This coverage provides necessary liquidity and peace of mind to shareholders and stakeholders alike knowing that the business can continue operations without major disruption. Planning associated with key person insurance can be the difference between a company's demise and its ultimate success. Specifically, key person insurance provides the financial means to stabilize a company during the adjustment period after the death or disability of a key employee or executive. Not only are the funds available to replace the financial impact of losing the key person, many times it also is designed to have funds available to identify and train someone new.

The determination of the amount of coverage needed by a corporation to be able to purchase key person insurance is largely dependent on the individual's value to the business. The more critical the individual's contribution to business success, the higher the capitalization factor used. Most of the time, corporations use some multiple of an individual's salary.