How Does Key Person Life Insurance Work? 
One example of key person life insurance would be to guarantee a quick and easy sale of the business upon the owner 's death . For example If the owner has a wife and children that are not active in the business and would have no idea how to run it , they would probably sell it in a distressed manner if the owner died unexpectedly . If he has a key manager that would be the likely person to sell it to they can purchase a life insurance policy on the owner 's life with the key man as the policy owner . The business can bonus the money to pay the premium to the key man . An attorney will write up a buy-sell agreement and the if the owner dies , his manager has the money and an agreed on price to buy the business from the widow . This makes the transition much easier for the widow PLUS has the benefit of keeping your key employee from straying off and being attracted to greener pastures . When there are multiple business owners , they each need a life policy on each other plus a legal agreement so they can buy out the spouse 's interests if one of them dies . They do n't want a business partner just because she/he happened to be married to their former business partner . 