This type of life insurance helps provide a business with protection against the economic loss it could suffer from the death of a key employee. The key employee is the insured, while the business owns the policy, pays the premiums, and is the beneficiary. At the death of the key employee, the business receives the life insurance proceeds free from federal income tax. Unless the key person was a majority owner in the business, there are no estate tax consequences for the insured key person.
Other types of Business Life Insurance include funding for Buy-Sell Agreements.