What type of insurance should a business buy to cover the life of its CEO?

Key person insurance, also known as key man insurance, is specifically designed to cover the life of an individual who is critical to the success of a business, such as a CEO. This type of policy provides the company with financial security by offering a death benefit that can be used to cover losses incurred from the loss of that individual. The funds can help the business manage ongoing expenses, find and train a successor, or address a decline in revenue that could result from the absence of the key person.

This form of insurance is important because the CEO often represents a significant asset for the company, contributing to its leadership, vision, and operational success. By having key person insurance, the business can mitigate the financial impact that would arise from the unexpected passing of such an important figure. In contrast, general liability insurance protects against lawsuits and claims arising from normal business operations, property insurance covers physical assets, and health insurance pertains to medical expenses for employees. None of these options directly provide coverage for the loss of a key executive's leadership and the consequential financial repercussions.