Key Person Insurance Life and Disability

Most financiers of a company have a vested interest in purchasing insurance for the key person running the company; to protect their loan, investor capital or executive partners. Unfortunately only professional bankers and fund managers, think about protecting their capital from an early death of the founder CEO.

Key Person Insurance is a life insurance to protect the capital invested/ loaned

In Asia, the existence of some businesses depends on the acting CEO. Key person insurance protects your capital invested or borrowed in case of early death or sudden disability of the main persons in charge of the business.

Key Person insurance protects your financial partners from loss of capital

In case of an early death of the founder or CEO, some businesses will have to stop. Key-person insurance will pay a definece lump sum effectively protecting their invested or loan capital. An early death means:
#1 total loss due to business closure or
#2 recruit a set managers or the special 1-one manager with the attributes to match the need for connections, knowledge and various management skills.
If possible to find, this ‘sudden and no-other choice situation’ has a price to pay may be huge to attract the perfect candidate in emergency:
- Hire an interim manager
- Hire head hunters
- Pay the short-notice welcome handshake
- Persuade the candidate to take the vacant challenge with top-salary
- And also stock-options in case success or golden parachute if failure

Health risks and medical insurance protection in Vietnam

By its expertise, connections or knowledge of the market, anything happening to the key person means closure or loss of it all; this is an insurable financial risk.


In practice, for SME business, the founder is indispensable and the capital at risk comes from:

  • The founder’s household or family ‘love money’
  • Founding partners capital invested
  • Investment funds
  • Loan from Bank or others

In the case of finding the ‘one-in-a-million’, the toughest the task and scarcity of candidates will dictate the cost that can easily reach the million US dollars.
In the case of filing for bankruptcy, the distribution of the monies depends on the valuation of the company, the priority of creditors and shareholders in proportion to the remaining.
The value of a company can be defined and agreed upon by financial valuation, sometimes including growth perspectives.

  • Security, tax and legal compliance are a preamble to define the net pay out in case of a claim.
  • The amount value can be revised yearly as the company revenue grows -for start-ups the costs and assets built are usually a good basis to define the Sum Insured.
  • The beneficiaries can be defined in multiple jurisdictions provided the currency of the plan is convertible worldwide.

Key person insurance depends largely on the Insurer’s jurisdiction:

  • Onshore ie. based in the country where the company is located. In such case the local insurance, business or inheritance laws.
  • Offshore ie. based in a country/jurisdiction where the insurance contract will be executed by the insurer as per the policyholder signed list of beneficiaries, regardless of the country of establishment of the business laws. Obviously the beneficiaries have to be legitimate by international criminal laws.

The right amount of protection, or sum insured, is usually based on the business assets, liabilities and growth valuation by auditors, plus the acceptance of the beneficiary list and residency for payments.

Depending on the offshore or onshore insurer contract selected: 

  • Claims payment may depend upon country, currency, priority or beneficiaries rights
  • Sum Insured distributed in case of death or work disability
  • Payment to creditors
  • Payment to shareholders
  • Other stakeholders payments like dependents or employee

Key Person insurance necessitates the following set of skills, rarely: business set-up, banking, investment, insurance, taxation, financial valuations, personal estate planning, Vietnam laws, offshore laws…  


A set of skills, rarely taught to a Vietnamese chief accountant or a finance manager, let alone to an engineering or factory production entrepreneur.


The money is usually big as far as production factories investments are concerned, selecting the sum to insure avoids overpaying a premium. But more importantly, the key is to understand the needs of the various stakeholders in the capital.

insurance in Asia

Not only health insurance is different but most general insurance: accident, life, home, travel, office or even car insurance will be different than your past experiences.