What is the purpose of key employee insurance?

Key employee insurance serves the crucial purpose of insuring against the loss of critical personnel within a business. This type of insurance provides financial protection to a company in the event that a key employee—someone whose contributions significantly impact the business's success—becomes unable to perform their duties due to death or disability.

When a key employee leaves, it can lead to financial loss, disruption of operations, and possibly a decline in revenue as the search for a replacement can take time. This insurance helps the business manage that risk financially by providing funds that can be used to cover immediate costs, recruit and train a replacement, or support the company during a transitional period.

The other options do not capture the specific intent of key employee insurance. While covering all employees equally, providing retirement benefits, or addressing liability claims may be relevant in different contexts of business insurance, they do not reflect the focus of key employee insurance, which is specifically aimed at safeguarding the business's interests tied to its essential personnel.