Frequently Asked Questions
Straight answers to the questions startup founders actually ask about key man insurance, buy-sell agreements, and business protection.
Key Man Insurance
What is key man insurance for startups?
Key man insurance is a life insurance contract owned by your business that pays out when a critical person — usually a cofounder, CTO, or key executive — dies or becomes disabled. The money goes to the company, not to the individual's family. It gives your startup the cash to survive the transition: hire replacements, retain key employees, and keep operations running.
How much does key man insurance cost for startups?
Less than you think. A healthy 30-year-old founder can get $1M in coverage for roughly $40-$60 per month. A 40-year-old in good health typically pays $80-$150/month for the same coverage. That's less than most SaaS subscriptions. See our full cost breakdown.
Do startups really need key man insurance?
If you have a cofounder, outside investors, key employees who are hard to replace, or business debt with personal guarantees — yes. Early-stage startups are actually MORE vulnerable to key person loss than large companies because knowledge, relationships, and authority are concentrated in fewer people. We built a decision framework to help you assess your specific situation.
Why do investors require key man insurance?
VCs invest in teams, not just products. If a founder dies, the investment thesis changes fundamentally. Key man insurance ensures the company has cash to survive the transition — recruit replacements, retain the team, maintain operations. For investors, it's basic risk management alongside D&O insurance and vesting schedules.
How quickly can I get key man insurance?
Coverage up to $1M often qualifies for simplified underwriting — a health questionnaire instead of a full medical exam. This typically takes 2-3 weeks for approval. Higher amounts requiring full underwriting take 4-6 weeks. Coverage can be active within 30 days in most cases.
Is key man insurance tax-deductible?
The death benefit paid to the company is generally tax-free. The premiums may be deductible as a business expense depending on the policy structure. Some structures like 412E contracts offer additional tax advantages. Consult your tax advisor for specifics — this is general information, not tax advice.
What's the difference between key man insurance and personal life insurance?
Key man insurance is owned by the company and pays the company. Personal life insurance is owned by you and pays your family. They serve completely different purposes — one protects the business, the other protects your family. Most founders need both.
What's the difference between key man insurance and D&O insurance?
Key man insurance protects the company from losing a key person (death or disability). D&O insurance protects directors and officers from lawsuits related to their management decisions. They cover completely different risks. Most funded startups need both.
Buy-Sell Agreements
What is a buy-sell agreement?
A buy-sell agreement is a legally binding contract between cofounders that predetermines what happens to ownership when someone dies, becomes disabled, retires, or leaves the company. It covers who buys the departing founder's shares, at what price, and where the money comes from. Think of it as a prenup for your business partnership.
What happens if my cofounder dies and we don't have a buy-sell agreement?
Their shares transfer to their estate — usually their spouse or heirs. Those people become your new shareholders with voting rights, information rights, and potentially board seats. They can't run the company, but they can block decisions. Without a buy-sell agreement, resolving this typically costs $100K+ in legal fees and takes 1-3 years.
We trust each other. Do we really need a buy-sell agreement?
Trust doesn't create liquidity. Even if you and your cofounder trust each other completely, a buy-sell agreement isn't about trust between living partners — it's about what happens when one of you can't be part of the conversation anymore. When someone dies, their estate (often a grieving spouse who has never seen your cap table) inherits their shares. The agreement protects both families and the company.
How is a buy-sell agreement different from an operating agreement?
Your operating agreement handles day-to-day governance — voting, decision-making, management structure. A buy-sell agreement handles ownership transitions — what happens when someone dies, leaves, or can't work. Operating agreements rarely have specific enough provisions for death or disability. You need both documents.
How much does a buy-sell agreement cost?
Legal drafting typically costs $3,000-$10,000 depending on complexity. The insurance funding (which provides the cash for the buyout) costs $50-$150/month per founder for $1M in coverage. The total cost is a fraction of what an unfunded ownership dispute costs.
We're too early stage for this. When should we create a buy-sell agreement?
The best time is when you take on a cofounder. The second best time is before you raise capital. If your company's equity is worth more than $500K, it's worth protecting. Early-stage companies are MORE vulnerable, not less — there's no deep management bench, no institutional processes, and every person is critical.
Working With Us
How does the process work?
It starts with a free 15-minute call where we assess your situation — team structure, ownership, investor requirements, existing coverage. From there, we recommend a protection strategy and connect you with the right specialists. Coverage is typically active within 30 days.
Do I need to get a medical exam?
For coverage up to $1M, most founders qualify for simplified underwriting — just a health questionnaire. Higher amounts may require a medical exam, which is usually a brief appointment (blood draw and basic vitals). It's less invasive than most founders expect.
Is the initial consultation really free?
Yes. The 15-minute assessment call is free, no obligation. We'll tell you what protection you need, approximately what it will cost, and how long it will take to put in place. If you want to proceed, we handle the process. If not, you walk away with clarity about your risk exposure.
Do you work with startups at all stages?
We work with startups from pre-seed through Series C and beyond. Protection needs change at each stage — a seed-stage company needs different coverage than a Series B company with $15M in ARR. We structure coverage that fits your current stage and scales as you grow.
Don't let your
biggest asset
become your
biggest liability
Every day without key man insurance is a day your investors are exposed. Let's fix that with a free risk assessment.