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What Is Key Man Life Insurance?
Key man life insurance, also known as key man (or woman) life insurance, is a life insurance policy a business buys on behalf of a key executive, partner or worker. The business pays the premiums for this coverage, and is also the beneficiary for this policy. If the insured person dies – if the key man or woman passes away – the business will receive a death benefit.
Think of the definition for key man insurance as a policy that a company would purchase concerning members of a business who are irreplaceable. For example: Some employees are so indispensable – they are the key men and women, without whom a business would suffer a huge financial loss or cease to operate entirely – that the payout from this type of life insurance could resolve corporate debts, absorb the expense of recruiting a new worker, partner or executive, and lessen any other monetary losses.
A company can even use the death benefit to buy out a late partner’s stake in the business with Key Man Insurance.