Business owners & entrepreneurs
Keep the business standing if a key person is gone
Most closely held companies depend on one or two people. Key person coverage gives the business capital to recover, replace talent, and reassure lenders and clients when the unexpected happens.
Who this is for
Founders, owners, and partners of closely held companies whose revenue, relationships, or credit depend on specific individuals.
See how this applies to entrepreneurs.
The problem
When an owner or critical employee dies, the business can lose revenue, relationships, and borrowing capacity at the same moment it has to recruit a replacement. Personal coverage protects the family; it doesn't protect the company.
How it works
- The business applies for, owns, pays for, and is the beneficiary of a policy on the key person.
- Coverage amounts are typically tied to a documented basis — lost profit contribution, replacement cost, or debt the person guarantees.
- Proceeds are paid to the company and can fund recruiting, cover operating shortfalls, or retire debt.
- Permanent policies can also accumulate cash value the business may access for other purposes over time.
Common use cases
- A founder whose personal relationships drive most of the revenue
- A company with bank loans personally guaranteed by an owner
- A technical or sales leader who would be costly and slow to replace
- Investor or lender requirements for coverage on principals
Important considerations
- Employer-owned policies must meet IRC §101(j) notice-and-consent requirements to keep death benefits income-tax-free.
- Premiums on key person coverage are generally not deductible.
- Coverage must be underwritten and is subject to insurability.
- Tax and accounting treatment should be confirmed with the company's CPA.
How American Dream Solutions helps
We help quantify a defensible coverage amount, compare term and permanent designs across multiple carriers, and coordinate ownership and paperwork with your CPA and attorney.
Independent and licensed in all 50 states, with access to 30+ carrier partners. Read more about the firm or review example case studies.
Learn more in our guides
Indexed Universal Life for Business Owners
How IUL is actually used in business-owner planning — key-person cover, buy-sell funding, supplemental retirement income — and where illustrations oversell.
The CPA & Estate Attorney Referral Protocol
How tax and legal professionals collaborate with an insurance specialist without losing control of the client relationship — scope, documentation, and compensation transparency.
Related services
What to expect
The first conversation is a no-obligation conversation. We ask about your goals, income, and existing coverage, explain the options that may fit, and tell you plainly if something isn't a fit. There's no application and no pressure.