Contractual key person insurance obligations are often found in mergers and acquisitions. They’re established when one company buys another company, and the acquisition agreement, or purchase agreement, requires “key person insurance.”  Your average advisor will recommend life insurance on the named key executive. Still, an exceptional advisor is keen to understand that a “key person insurance” clause within a purchase agreement requires a corporately owned key person life and disability policy to keep the company – and the deal – afloat.

Other ideal candidates for key person disability are truly irreplaceable individuals that drive a company’s success, like hedge fund managers, private equity and/or asset managers, business owners, renowned surgeons for a hospital, chief technology officers, and key relationship managers.  However, a disturbing survey of 1,400 business owners revealed that less than 15% had a plan if their key people became disabled.  In today’s competitive business environment, protecting the value of star executives is more critical than ever.

In your next board meeting, ask: “What would happen if one of our key executives became disabled from an accident or serious illness? Who could successfully run the company?  And, what are the financial implications to the company to replace that person from the outside if there were no one in place in-house?”


We share a case study below of two key hospital network executives.  The CEO & CFO were the driving forces behind the hospital network’s continued growth and financial stability.  The board was challenged with securing an adequate amount of disability insurance to protect the hospital should one, or both deal makers go down due to an illness or disability.  A solution was found in the customized design and placement of a $30 million and $15 million key person disability policy for the CEO & CFO, respectively.  The policies, payable to the hospital in a lump sum after 12 months, provided a financial cushion for the hospital board should the CEO and/or CFO be unable to perform their duties.


A Texas-based hospital network with $4 billion in revenue.


As a team, the CEO & CFO of an extensive hospital network were responsible for aggregating and integrating hospitals into their system.  These two key players drove deals and actualized the hospital network’s growth.


Without these two deal makers, the hospital board realized the financial implications involved if one or both should go down due to an illness or disability. For these reasons, the hospital sought key person disability coverage for both the CEO & CFO.


The following policies were designed and placed: a $30 million and a $15 million key person disability policies on the CEO and CFO, respectively. The policies, which were payable to the hospital in a lump sum after 12 months, provided a financial cushion for the hospital board should the CEO and/or CFO be unable to perform their duties.


With a key person disability insurance protection plan in place, the hospital board could rest easy knowing the future growth of the hospital network was protected if the CEO and/or CFO were permanently disabled.

If you want to protect your organization, you need the willingness to ask yourself the following questions:

  • Who are the Key People in my organization?
  • What are their contributions to the bottom line?
  • What would happen to the integrity and profitability of my organization if these people could no longer fulfill their responsibilities?

Then take action……  Find an exceptionally skilled and trusted advisor with the knowledge and industry relationships to develop a customized solution that addresses your unique and personal corporate needs.

If you have any questions or if I can be of help, contact me.  I’m here to help!

Cindy Fields