What is key man insurance?

Question

who is a key man and who pays the premium

Answer 1

The above was a good explanation which I don't think fully answered your question.

A key man is someone who is so important to a business that the death of that person could cause the business to fold or suffer severe financial strain. Key man insurance, which is usually paid for by the business, is a life insurance policy which pays the face value to the business should the key man die. The money is used to keep the business afloat while training a new person to take his place.

Key man insurance is also often purchased by partners. Each partner takes out a policy on the other partner. Should one partner die not only will the money help keep the business going but can also be used to buy the dead partner's share of the business from his heirs.

Answer 2

Keyman Insurance can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of the member of the business specified on the policy. The policy’s term does not extend beyond the period of the key person’s usefulness to the business. The aim is to compensate the business for losses and facilitate business continuity. Keyman Insurance does not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified on the insurance policy