Key person insurance has some similarities with both life insurance and death in service insurance, but there are some important differences.
Unlike life insurance, which is designed for private individuals, key person insurance is designed for companies. Therefore, in the event of the death of the key person insured, the lump sum payment is paid to the company, not the individual’s spouse or family.
Death in service insurance is an employee benefit taken out by an employer to pay out a lump sum to an employee’s family on their death. It is usually based on a multiple of their annual salary.