Key Man Insurance Law and Legal Definition

Key man insurance is an important form of business insurance. A key man can be anyone directly associated with the business whose loss can cause financial strain to the business. In general, key man insurance can be described as an insurance policy taken by a business to compensate that business for financial losses arise from the death or extended incapacity of a member of the business specified on the policy. However, the policy term will not extend beyond the period of the key person’s usefulness to the business. The aim of the key man insurance is to compensate the business for losses and facilitate business continuity. However, key person insurance will not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified on the insurance policy.