A key person is an individual whose continued association with a business provides that business with a significant and direct economic
gain. This may be the CEO, Founding Director, Director or similar senior position. Economic gain means more than just profits. It can also
include capital injections, cost efficiency, goodwill, access to credit and contacts with suppliers and customers. Business owners will
also usually be key people.
Key person insurance can compensate the business for the loss of a key person in two different ways: business profitability (revenue purpose) and the capital value of the business (capital purpose). Key person insurance proceeds can be applied to maintain the capital value and stabilise the business.