Key person life insurance provides a business with protection against economic loss suffered from the death of a key employee. Key employees are any employee whose death will negatively impact a company by reducing revenue due to lost business and/or increasing expenses by the need to hire and train an adequate replacement. The business owns the life insurance policy, pays the premiums, and is the sole beneficiary. The key employee is the insured. Upon the death of the key employee, the business generally receives the life insurance death benefit free of federal income tax.
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