What would likely be the purpose of a key person insurance policy?

The purpose of a key person insurance policy is to protect a business from the financial impact that can arise from the death or disability of an essential employee, such as an executive or a highly skilled individual whose contributions are critical to the company's success. This type of insurance allows the business to receive a payout that can help mitigate losses due to the absence of that key employee, enabling the company to find a replacement or maintain operations during a difficult transitional period.

Key person insurance helps cover a variety of potential financial strains, such as loss of revenue, recruiting and training costs for a new hire, or even potential business disruptions. By providing a financial cushion, this policy aids in stabilizing the business in an uncertain time.

Other options do not align with the primary function of key person insurance. For instance, funding an employee's retirement plan is not related to the immediate financial needs following a key employee's departure. Employee theft coverage pertains to other forms of insurance, while providing benefits to an employee's family would suggest personal life insurance, which is distinct from the business-oriented nature of key person policies.