What is the term for insurance that protects a business from the financial loss of a key employee's death?

The term for insurance that protects a business from the financial loss of a key employee's death is key person insurance.

Also called keyman insurance, it is usually purchased and owned by a business on the life of an employee whose knowledge, leadership, relationships, or income generation is unusually important. The company is generally the beneficiary, so proceeds can help replace lost revenue, recruit and train a successor, or protect business loans and ownership interests.

The policy is not limited to company directors. A sales executive with crucial clients, a technical specialist, or a founder may qualify as a key person. Coverage can sometimes address extended incapacity as well as death, depending on the policy and jurisdiction.

A common mix-up is business interruption insurance, which usually responds to covered operational disruptions such as property damage. Buy-sell insurance, by contrast, helps fund the purchase of an owner's business interest after a triggering event. Key person insurance focuses on the financial consequences of losing a vital individual, not on replacing ordinary employee benefits.