Key person insurance is insurance which is owned by a business entity to provide a lump sum or income stream in the event that a key person within the business becomes incapacitated or passes away and is unable to work in that business. The proceeds from this insurance can be used for revenue or capital purposes depending on the type and purpose of the insurance.
Buy sell insurance is an insurance policy which is linked to a business agreement on succession planning. The proceeds from this insurance policy can be used to buy the out one persons share of a business should that person pass away or become too ill to continue as part of the business. Instructions on the use of proceeds of the insurance are contained within the buy sell agreement.