Key-Person life insurance is purchased by a business on the life of an owner and/or employee whose services contribute substantially to the success of the business.  The business owns the insurance policy, pays the premium and is the beneficiary of the policy.

For Key-Person insurance purposes, the insured owner or employee may be thought of as a valuable asset that is insured by the firm - in the same manner that its business buildings are insured against physical damage.

The insured almost always is someone who makes some substantial contribution toward the operation and the success of the business. This person may be one of the owners of the business, or may be a "key" employee. 

Regardless, this person's sudden death would mean that not only would the deceased's services be lost to the firm, but that whoever was the replacement would probably have less experience and training. Therefore, the Key-Person's death is certain to disrupt the firm, and probably result in definite and tangible losses.