Key person insurance types (and what you need to know) Key person insurance (also known as “key man insurance”) is a policy designed to pay a designated amount to a specified beneficiary if the named ‘key person’ dies during the policy period. A company in this situation has to deal with the cost of a serious interruption to business activities.
Given our relationships with a lot of early stage VCs in around the country, we do a ton of Key Man Insurance policies. If you’re unfamiliar with these, Key Man policies are basically a life insurance policy that pays out to the company if anything happens to the “Key Man.” And if you’re unfamiliar with
Many VC investors require founders going through an institutional round of funding to get key person insurance. For those of you that are nearing the close of your first big seed or series A round, there are two routes you can go in procuring your key person insurance policy: The traditional route or the Founder Shield
Key Man Life Insurance can be touchy subject for most startup founders. Most of the time it’s a “just-don’t-think-about-it” situation, and the only time the idea even comes up is when it appears on the Series A term sheet. Entertaining the thought of losing a co-founder is one of the last things any entrepreneur wants
Key man insurance for startups doesn’t really exist in the life insurance markets. There are a few reasons for this and I’ll explain the big ones.
We usually talk about key man insurance with our clients in the wake of a freshly closed round of institutional funding. Investors typically make their portfolio companies get key man insurance to protect their own cash. They realize that at most startups, the team is the company. It takes a truly phenomenal team to guide