Key Person (Key Men)

Key Person (Key Men) Insurance in Texas

Serving Cedar Park, San Antonio, Spring Branch and surrounding areas

Protect the People Who Keep Your Business Running

Your business depends on people—not just equipment, buildings, or contracts. If one critical person were suddenly gone, would your business be able to keep operating, paying bills, or reassuring clients?

That’s where key person life insurance comes in.

At Dowd Insurance Agency, we help Central Texas business owners use key person insurance to protect cash flow, stabilize operations, and give lenders, partners, and employees confidence in the future of the business.

What Is Key Person Life Insurance?

Key person life insurance (sometimes called key man insurance) is a life insurance policy a business owns on the life of a critical employee, owner, or executive.

• The business owns the policy
• The business pays the premiums
• The business is the beneficiary

If the insured person passes away, the business receives a tax-free death benefit that can be used to offset financial losses and keep the company moving forward.

Who Is Considered a “Key Person”?

A key person is anyone whose loss would create a significant financial or operational disruption, such as:

• A business owner or co-owner
• A top revenue-producing salesperson
• A founder with specialized knowledge
• A senior executive or manager
• A technical expert who is hard to replace

If your business would struggle to function—or lose revenue—without them, they’re likely a key person.

Why Key Person Insurance Matters for Your Business

When a key person passes away, the impact goes far beyond emotional loss. Businesses often face:

• Lost revenue or stalled growth
• Costs to recruit and train a replacement
• Loss of client or vendor confidence
• Disruption to daily operations
• Pressure from lenders or investors

Key person insurance provides liquidity at the exact moment your business needs it most.

Practical Key Person Coverage Example

Imagine a Central Texas construction company loses its lead estimator—the person responsible for pricing jobs and securing contracts. Projects slow, bids are delayed, and revenue drops. A key person policy can provide funds to hire interim help, recruit a replacement, and keep payroll and overhead covered during the transition.

What Can the Insurance Payout Be Used For?

The death benefit from a key person policy can be used however the business needs, including:

• Covering lost revenue
• Paying operating expenses or payroll
• Recruiting and training a replacement
• Paying down business loans
• Reassuring investors, partners, or lenders
• Funding ownership transitions

There are no restrictions on how the business uses the funds.

Types of Key Person Life Insurance

Term Life Insurance (Most Common)

• Coverage for a specific period (10, 15, 20 years)
• Lower premiums
• Ideal for covering critical growth years or loan terms

Permanent Life Insurance

• Lifetime coverage
• Higher premiums
• Can build cash value over time
• Sometimes used in succession or long-term planning strategies

We help you decide which structure aligns with your business goals and budget.

How Much Key Person Insurance Do You Need?

Coverage amounts are typically based on factors such as:

• The person’s contribution to revenue or profit
• Replacement costs
• Outstanding business debt
• Length of time needed to stabilize the business

A common rule of thumb is 5–10 times the key person’s compensation, but every business is different. We tailor coverage to your actual risk—not a generic formula.

Key Person Insurance vs. Buy-Sell Insurance

These are often confused but serve different purposes:

Many businesses use both as part of a well-rounded risk management plan.

Frequently Asked Questions

Is key person insurance tax deductible?

Premiums are typically not tax deductible, but death benefits are usually received tax-free by the business. We recommend confirming details with your CPA.

Does the employee have to consent?

Yes. The insured person must provide written consent and be aware of the policy.

Is key person insurance required?

It’s not legally required, but it’s often required by banks or investors as a condition of financing.

Can small businesses get key person insurance?

Absolutely. Many small and mid-sized businesses benefit the most because they rely heavily on a few individuals.

Why Work With Dowd Insurance Agency?

As an independent insurance agency, we’re not tied to one carrier. That means we can:

• Compare multiple insurers
• Customize coverage for your industry
• Explain complex concepts in plain language
• Support businesses across Central Texas and beyond

We work with business owners in Austin, Cedar Park, New Braunfels, San Antonio, Houston and surrounding areas.

Let’s Protect the Future of Your Business

If losing one person would seriously impact your business, key person insurance isn’t optional—it’s essential.

Contact Dowd Insurance Agency today to discuss key person life insurance options and get coverage tailored to your business goals.