If your company depends on one person — that person needs to be covered.
Key person insurance protects the business from the financial impact of losing the individual most critical to its survival. For most early and growth-stage companies that person is the founder. For established businesses it's often the CEO, a critical sales leader, or a technical founder whose departure would materially change the company's trajectory.
Investors require it. Lenders require it. And regardless of whether anyone is asking for it — if the business can't survive losing you, it needs a plan for what happens if it does.
Who this protects
Founders and co-founders
Your company's valuation is partly a bet on you. Key person coverage gives investors, co-founders, and employees a financial runway to stabilize, recruit, and continue operations if something happens to you. Many term sheets and board agreements now require it explicitly.
C-suite executives and critical hires
Revenue-generating leaders, technical founders, and executives whose departure would trigger immediate financial exposure — customer attrition, delayed product delivery, or loss of critical relationships. The coverage amount reflects the financial impact of that specific loss.
Closely held companies and partnerships
When a small number of people drive most of the revenue and carry most of the institutional knowledge, the company's survival depends on their continued involvement. Key person coverage provides the capital to adapt when that changes unexpectedly.
Companies with lender or investor requirements
SBA loans, venture debt, and many institutional investors require key person coverage as a condition of the financing. Stead structures coverage that satisfies these requirements efficiently — with the right face amount, ownership structure, and documentation for your specific agreement.
How the coverage actually works
The business owns the policy and is named as the beneficiary. Premiums are paid by the business. If the insured person dies during the policy term, the business receives the death benefit directly — typically income tax free.
The proceeds can be used for anything the business needs: funding a search and recruitment process, retiring debt that was personally guaranteed, buying time to restructure, distributing to shareholders as a partial offset to the loss of value, or funding a buy-sell obligation if the key person is also an owner.
For disability exposure — the risk that a key person becomes unable to work but doesn't die — a separate key person disability policy covers the income replacement and continuity costs. Most companies insure both risks on the same individual.
The face amount is calculated based on the financial impact of the loss — typically a multiple of the key person's compensation, their contribution to revenue, the cost to replace them, or the amount of any personally guaranteed obligations. There's no single formula. The right number depends on your specific business.
Structuring it correctly
The most common mistakes in key person coverage are getting the face amount wrong, misaligning the ownership and beneficiary structure with existing shareholder agreements, and failing to review coverage when the business changes.
Face amount should be recalculated at every major inflection point — a new funding round, a significant revenue milestone, a change in the team. Coverage that was appropriate at Seed is almost always insufficient at Series B.
Ownership structure matters for tax treatment and for coordination with buy-sell agreements. If the key person is also a shareholder, the key person policy and the buy-sell funding policy serve different purposes and should be structured separately — even if the insured is the same person.
Coordination with your attorneys and investors is essential. We stay in that conversation rather than placing coverage in isolation and walking away.
How Stead structures key person coverage
We start with the business's actual financial exposure — not a formula. We model the coverage amount against the specific loss scenario: revenue impact, replacement cost, debt obligations, and investor requirements.
We compare options across carriers for the insured's health profile and the business's structure. For founders with complex health history, occupation, or face amounts above $3-5M, carrier selection and underwriting navigation matter significantly. We know where to go.
We coordinate with your existing attorneys and advisors rather than working around them. Key person coverage doesn't exist in isolation — it sits inside a legal and financial structure that affects how it works and how the proceeds can be used. Getting that structure right requires everyone in the room.
Policy documentation your business can find
Key person policies often need to be accessed by someone other than the insured — a co-founder, a CFO, or an attorney managing an estate. Your Life Vault stores the policy document, ownership records, beneficiary designations, and carrier contact information with role-based access. The right people can find what they need immediately without searching through years of email.
Does your business have a plan if it loses you?
Most early-stage companies don't — or have coverage that hasn't been reviewed since it was placed. Book a call and we'll assess your actual exposure and whether your current coverage addresses it.