Compliance
Key Person Insurance
Quick definition
Life insurance policy on a founder or critical employee where the company is the beneficiary, providing cash if they die or become disabled.
Key person insurance protects the company from the financial impact of losing a critical founder/executive (death, long-term disability). The company pays premiums and is the beneficiary. Common requirement in venture debt and term loans (lenders want to ensure their loan is repaid if the founder dies). Typical coverage: $1-5M per key person. Annual premium: $1-3K per $1M of coverage for healthy founders.
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Insights, guides, and tools where Key Person Insurance shows up.
Frequently asked questions
- What is Key Person Insurance?
- Key person insurance protects the company from the financial impact of losing a critical founder/executive (death, long-term disability). The company pays premiums and is the beneficiary. Common requirement in venture debt and term loans (lenders want to ensure their loan is repaid if the founder dies). Typical coverage: $1-5M per key person. Annual premium: $1-3K per $1M of coverage for healthy founders.
- Why is Key Person Insurance important for startups?
- Key Person Insurance is a compliance concept that matters for startup founders because it shows up in fundraising readiness, financial decision-making, and operational discipline at the stage where mistakes are expensive to undo. Founders who understand it are better prepared for diligence, board meetings, and investor conversations.
- What category does Key Person Insurance belong to?
- Key Person Insurance is a Compliance term in the StartupCFO finance glossary, alongside other compliance concepts that founders, CFOs, and accountants use in startup operations and reporting.
- Where can I learn more about Key Person Insurance?
- Beyond this definition, see the related compliance terms below, or explore StartupCFO's insights and tools that put Key Person Insurance in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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