Most banks require key-person insurance on the principal officers of the borrowing company to protect their loans. Because the repayment of a loan usually depends upon the managers of the firm running the company profitability, the death or disability of a key manager could jeopardize the safety of the loan. To avoid this uncertainty, the borrower buys a term insurance policy on the life of the key manager for the value of the loan. If he or she should die, the proceeds of the policy would be paid to the bank in settlement of the loan. Keyperson insurance is useful in sole proprietorships as well as corporations.