How Does Key Person Life Insurance Work? 
Key Person -LRB- Key Man -RRB- is a life insurance policy purchased with the intention of compensating the business for the loss of services of an important -LRB- key -RRB- person due death . Often the key person is a `` rainmaker '' that is responsible for a significant portion of the business revenue . In some situations the loss of the key person can create a financial strain on the business , even to the point of forcing the business to close or sell at a loss . In a key person life insurance plan , the key person is the insured ; the business is the owner , premium payer and beneficiary . Key person premiums are not tax deductible to the business . The policy proceeds are not taxable . 