Protecting Your Business From the Unexpected
Every successful business relies on people who are difficult—sometimes impossible—to replace. These individuals drive revenue, maintain operations, manage client relationships, or hold crucial technical or strategic knowledge. If one of them becomes critically ill, disabled, or passes away, the financial impact can be substantial.
Key Person Insurance helps businesses prepare for this risk. It provides the financial stability needed to keep operations running smoothly, protect jobs, and maintain confidence with clients, suppliers, and lenders.
Our firm supports business owners across Quebec and Ontario in understanding and implementing the right protection. We work independently, comparing options from leading insurance providers such as Sun Life, Canada Life, Manulife, iA Financial, and many more, while following AMF and FSRA guidelines.
What Is Key Person Insurance?
Key Person Insurance is a business-owned policy designed to protect the company—not the employee’s family—if a crucial team member becomes unable to work or passes away.
The business is:
• the policy owner,
• the premium payer, and
• the beneficiary of the insurance proceeds.
This coverage is especially important for companies that rely heavily on one or a few individuals whose skills or knowledge are central to daily operations or revenue generation.
Who Is Considered a “Key Person”?
A key person is anyone whose absence would significantly affect the company’s performance, such as:
• Owners and founders
• Senior executives
• Top salespeople
• Technical experts
• Specialists with rare skills
• Business partners
• Anyone whose contribution is critical to revenue or continuity
Many small and medium-sized businesses have at least one person who fits this definition.
Why Businesses Need Key Person Insurance
Losing a key individual—even temporarily—can cause:
• Lost revenue or client relationships
• Delays in operations
• Higher operational costs
• Difficulty finding and training replacements
• Reduced business value
• Loss of lender or investor confidence
Key Person Insurance provides a financial cushion to help the company navigate the transition.
Types of Key Person Insurance
Major insurers such as Sun Life, Canada Life, iA Financial, Desjardins, and Manulife offer multiple forms of protection. Common options include:
1. Key Person Life Insurance
Pays a tax-free lump sum to the business if the key person passes away.
This money may be used for:
• Hiring and training a replacement
• Protecting cash flow
• Paying off debts or business loans
• Maintaining operations
• Stabilizing the company during transition
2. Key Person Disability Insurance
Provides monthly income to the business if the key person cannot work due to long-term disability.
This helps cover:
• Salary replacement
• Operational expenses
• Hiring temporary staff
3. Key Person Critical Illness Insurance
Pays a lump sum if the key person is diagnosed with a serious illness such as cancer, heart attack, or stroke.
The benefit can help with:
• Maintaining productivity
• Covering business expenses
• Supporting a temporary succession plan
How Companies Use Key Person Benefits
Businesses may use the insurance payout to:
• Offset lost profits
• Cover the cost of recruiting talent
• Bridge cash-flow gaps
• Pay debts or secure credit lines
• Reassure investors or creditors
• Support ongoing projects
• Protect the value of the business before a sale
For partnerships, Key Person Insurance often works hand-in-hand with Buy–Sell Agreements.
How Much Coverage Does a Business Need?
Coverage depends on factors such as:
• The key person’s role and responsibilities
• Their contribution to revenue
• Cost of replacement and training
• Business debt or loans tied to their performance
• Impact on operations if they are absent
• Business continuity requirements
We help assess these factors and recommend a coverage amount that aligns with your goals and budget.
Tax Considerations
While each case must be reviewed by an accountant, here are general guidelines:
• Premiums for Key Person Insurance are typically not tax-deductible.
• Life insurance payouts are usually received tax-free.
• Critical illness and disability payout treatment depends on policy structure.
• Corporate-owned policies may impact valuation or succession planning.
We coordinate with your accountant to ensure your plan respects CRA, AMF, and FSRA requirements.
Key Person Insurance for Small and Medium-Sized Businesses
This protection is especially important for:
• Family-owned businesses
• Startups and growing companies
• Professional firms (medical, dental, accounting, legal)
• Technology and engineering firms
• Contractors and trades
• Businesses with specialized staff
• Companies with limited management depth
When a business relies on one person’s expertise, replacing that person becomes a major financial challenge—Key Person Insurance helps reduce the risk.
Our Role in Your Protection Plan
As an independent advisory firm, we help businesses:
• Identify key individuals
• Determine appropriate coverage amounts
• Compare insurance solutions from multiple providers
• Integrate the plan with buy–sell strategies
• Ensure compliance with provincial guidelines
• Coordinate with your lawyer and accountant
Our goal is to protect the long-term stability of your business with thoughtful, well-structured planning.
Protect Your Business Before the Unexpected Happens
Key Person Insurance is an essential part of business protection. It provides financial stability at the exact moment your company needs it most.
If you want to safeguard your business, team, and long-term growth, the next step is receiving a personalized review.
Book a consultation with us to explore Key Person Insurance options and design a strategy tailored to your company’s needs.
