Key Persons Insurance – This policy is based on a standard life policy paying out a lump sum in the event of the death. Where this policy differs is that it is usually taken out by a business to cover the financial implications of losing a key member of staff. The reason this coverage is important is because the death of a key person in a small company can cause the immediate death of that company. The purpose of key person insurance is to help the company survive the blow of losing the person who makes the business work. The company can use the insurance proceeds for expenses until it can find a replacement person, or, if necessary, pay off debts, distribute money to investors, pay severance to employees and close the business down in an orderly manner. In a tragic situation, key person insurance gives the company some options other than immediate bankruptcy