All businesses, regardless of their size, have key employees — people whose contributions have a significant impact on the bottom line.

A key employee is anyone who makes a significant contribution to your company's financial success — a company president, talented sales director, a product designer, a partner who makes key management decisions, or an executive who is a TV advertising personality. And, unlike a machine, key employees are not so easily replaced.

Businesses that depend on a particular piece of equipment typically insure it. The loss of a key employee can have a serious financial impact. In addition to the human tragedy, the loss of a key person often means the loss of important customers, skill sets or business relationships.

Key person life and disability insurance can help a business protect itself against the financial risk associated with losing a key employee.

Life insurance purchased on the life of a key person will pay the business, upon that employee's death, the proceeds of the policy. That benefit can be used to cover financial expenses and train the key person's replacement.

Key person life insurance can also provide a cash value benefit depending on the type of policy purchased. This cash value can be used for a few strategic business reasons while the employee is still living.

When a key employee is disabled the loss is experienced in two ways. The first is the loss of profits that would have been attributed to the key employee. The second is the cost associated with finding a replacement. Key-Person Disability coverage is designed to provide your business with income during the disability of a key employee.

Planning for key employees can help small business owners offer attractive incentives to retain key employees, while planning for a potential business loss.