What happens to key person insurance if the key person leaves the company?

When a key person leaves the company voluntarily or through termination (other than death or disability), the key person insurance policy typically remains the property of the business and cannot transfer to the departing employee. This is a fundamental difference from personal insurance. The business has several options when this occurs. First, the business can cancel the policy and cease paying premiums, as the person is no longer key to operations. Second, the policy can be reassigned to cover a new key person who has replaced the departing employee, though this usually requires underwriting approval from the insurer and may result in premium changes based on the new person's age, health, and role. Third, in some cases, the business might maintain the policy temporarily during a transition period if the departing key person is still contributing in a consultancy role. Some policies include portability options allowing conversion to a personal policy for the departing key person, though this is not standard. It's important to review key person insurance arrangements regularly and update them when significant personnel changes occur, ensuring your business protection remains aligned with current key person dependencies and risks.