{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/who-legally-owns-a-key-person-life-insurance-policy-and-who-receives-the-death-benefit","api_url":"https://dealroom.so/api/public/questions/who-legally-owns-a-key-person-life-insurance-policy-and-who-receives-the-death-benefit","question":"Who legally owns a key-person life insurance policy and who receives the death benefit?","topic":"Business life insurance & protection","audience":"borrower","bot_mode":"buyer","short_answer":"In a key-person life insurance arrangement, the business typically owns the policy, pays the premiums, and is named as the beneficiary, receiving the death benefit directly.","rule":"This structure ensures that the business itself is protected financially from the loss of a critical employee. The policy's cash value, if it's a permanent policy, can also be an asset on the company's balance sheet.","example":"ABC Inc. purchases a $1,000,000 key-person policy on its CTO. ABC Inc. is listed as the policy owner, pays all monthly premiums, and upon the CTO's death, the $1,000,000 death benefit is paid directly to ABC Inc. to help maintain operations.","what_lenders_check":"Lenders need clear documentation that the business owns the policy and is the primary beneficiary, especially if the policy is collaterally assigned. This ensures the funds will go to the business to support continuity and debt repayment.","required_facts":["Business owns policy","Business pays premiums","Business is beneficiary","Death benefit to business"],"source_families":[],"official_sources":[],"related_questions":[{"question":"What is key-person life insurance and why is it crucial for small businesses?","url":"https://dealroom.so/sba-7a/questions/what-is-key-person-life-insurance-and-why-is-it-crucial-for-small-businesses"},{"question":"Who should a business identify and insure as a key person?","url":"https://dealroom.so/sba-7a/questions/who-should-a-business-identify-and-insure-as-a-key-person"},{"question":"What is the typical amount of key-person life insurance coverage needed?","url":"https://dealroom.so/sba-7a/questions/what-is-the-typical-amount-of-key-person-life-insurance-coverage-needed"},{"question":"Who owns and is the beneficiary of a key-person life insurance policy?","url":"https://dealroom.so/sba-7a/questions/who-owns-and-is-the-beneficiary-of-a-key-person-life-insurance-policy"},{"question":"What are the tax implications of key-person life insurance premiums and benefits?","url":"https://dealroom.so/sba-7a/questions/what-are-the-tax-implications-of-key-person-life-insurance-premiums-and-benefits"},{"question":"Why would a buyer require life insurance on a seller during business acquisition?","url":"https://dealroom.so/sba-7a/questions/why-would-a-buyer-require-life-insurance-on-a-seller-during-business-acquisition"}],"related_terms":[{"term":"Death benefit","url":"https://dealroom.so/glossary/death-benefit"},{"term":"Whole life insurance policy","url":"https://dealroom.so/glossary/whole-life-insurance-policy"},{"term":"Universal life insurance policy","url":"https://dealroom.so/glossary/universal-life-insurance-policy"},{"term":"Decreasing term life insurance policy","url":"https://dealroom.so/glossary/decreasing-term-life-insurance-policy"},{"term":"Life insurance","url":"https://dealroom.so/glossary/life-insurance"},{"term":"Key man insurance","url":"https://dealroom.so/glossary/key-man-insurance"}],"related_tools":[{"name":"Life insurance coverage estimator","url":"https://dealroom.so/seller-life-insurance#ins-estimator"},{"name":"Request insurance quotes","url":"https://dealroom.so/seller-life-insurance#ins-quote"}],"data_freshness":{"last_reviewed":"2026-06-15","sba_rule_sources_checked_through":"2026-06-15"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/who-legally-owns-a-key-person-life-insurance-policy-and-who-receives-the-death-benefit","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}