Which type of life insurance is typically used for business key man policies?

When it comes to business key man insurance policies, the most suitable type of life insurance is typically term life insurance. Key man insurance is designed to compensate a business for the loss of an essential employee, whose skills, knowledge, and experience are crucial to the business's success. The temporary nature of a key man's contribution often aligns well with the purpose of term life insurance, which offers coverage for a specific period.

Term life insurance is generally less expensive than other types, making it an attractive option for businesses looking to ensure financial stability during the absence of a pivotal employee. The proceeds from the policy can be used strategically to cover operational costs, hire a replacement, or pay off debts, thereby providing a financial cushion for the business.

While whole life, universal life, and variable life policies offer different benefits, including cash value accumulation and permanent coverage, they may not be the best fit for the specific needs of key man insurance. These options tend to be more complex and often involve higher premiums, which may not align with the immediate and straightforward protection needed in a key man scenario.