What type of insurance policy is often used for "key person" insurance in a business setting?

In a business setting, "key person" insurance is typically associated with whole life insurance policies because they provide a permanent life insurance solution. Whole life insurance not only offers a death benefit that can help cover the financial impact of losing a key employee but also accumulates cash value over time. This cash value can be used by the business for various purposes, such as financing operations or fulfilling obligations in the event of the loss of the key individual.

The permanence of whole life insurance makes it particularly suitable for key person coverage, as businesses often want to ensure ongoing financial support without the concern of policy expiration, which can happen with term life insurance. While term life insurance provides a death benefit for a specified period, it does not build cash value and is generally less ideal for long-term key person insurance needs. The other options, such as variable and universal life insurance, have features that might not align with the straightforward needs of a key person policy, particularly when cash value accumulation and guaranteed coverage are a priority.