What is a key man insurance policy?

A key man insurance policy is designed to protect a business from the potential financial loss it may suffer if a key employee, often a top executive or owner, were to pass away or become unable to work due to illness or injury. This type of insurance provides the business with a cash benefit that can be used to help cover the costs associated with finding and training a replacement, as well as to ensure business continuity during a potentially disruptive time.

The intention behind this policy is to mitigate the risk that a company faces when a vital person, whose contribution is crucial to the organization’s success, is no longer available. This demonstrates the value of the individual to the business, making the policy a financial safeguard against the loss of talent that could adversely affect operations and profitability.