What happens to key person insurance premiums if the key person's health deteriorates?

When a key person's health deteriorates after a key person insurance policy is in force, the impact on premiums depends on the policy structure and when the health change occurred. For most key person insurance policies with level premiums, existing coverage continues at the original premium rate regardless of health changes after the policy commences - this is a fundamental feature of life insurance contracts where premiums are guaranteed based on the health status at policy inception. The deteriorating health doesn't affect current coverage costs. However, if the business seeks to increase the coverage amount or add new coverage types after health deterioration, the insurer will require new underwriting based on current health status, likely resulting in higher premiums, premium loadings for specific conditions, exclusions for pre-existing conditions, or even declined coverage for additional insurance. If the policy lapses and the business attempts to reinstate it or take out new coverage, full underwriting based on current health applies. Some policies include built-in indexation benefits that automatically increase coverage annually without medical underwriting, though premium increases apply. This is why it's crucial to secure adequate coverage while key persons are healthy and maintain policies continuously. For stepped premium policies (premiums that increase with age), health deterioration doesn't directly affect premiums, but age-related increases continue annually. If health deteriorates significantly, it emphasises the value of having secured insurance early at favorable health-based rates.