Key man insurance

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Key Man insurance (now also called Key Person Insurance) is a type of Corporate-owned life insurance which insures an employer against the death or incapacitation of a so-called key employee, usually an executive.

An employer may take out a Key Man insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The employer does this to offset the costs (such as hiring temporary help or recruiting a successor) and losses (such as a decreased ability to transact business until successors are trained) which the employer is likely to suffer in the event of the loss of a key person.

The key person may be an executive, principal shareholder, a senior scientist, or a particularly effective salesperson.