👤 Key Person vs. Buy-Sell Funding: Who Covers What? 🇨🇦
For many small and mid-sized businesses in Canada, success depends on a handful of critical individuals. The sudden loss of one of these people can disrupt operations—or even threaten the company’s survival. Two important tools help manage this risk: Key Person Insurance and Buy-Sell Agreement Funding. While both involve insurance, they serve very different purposes.
⚡ Key Person Insurance (P&C / Life & Benefits)
- Protects the business if a key employee, executive, or founder becomes disabled or passes away.
- Provides funds to offset lost revenue, hire and train replacements, or stabilize operations.
- Typically arranged as life or disability insurance on the individual, with benefits paid directly to the business.
đź“‘ Buy-Sell Agreement Funding (Life/Benefits)
- Ensures surviving partners can purchase the deceased or disabled owner’s share of the business.
- Commonly funded with life insurance policies taken out on each shareholder.
- Prevents ownership disputes, ensures continuity, and provides fair value to the departing owner’s family.
🏢 Where P&C Fits In
- Property & Casualty policies (such as Business Interruption Insurance) may cover revenue losses tied to physical damage but not the loss of a person.
- That’s why Life & Benefits coverage is essential to complement P&C insurance and create a complete risk management plan.
âś… The Takeaway
Think of it this way: Key Person Insurance protects the business itself, while Buy-Sell Funding protects ownership continuity. Together, they provide a strong foundation for business resilience and succession planning.
👉 Has your business reviewed both strategies recently?
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