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Key man insurance is a form of insurance coverage available to businesses. The insurance provides resources to help the company weather the unanticipated and sudden loss of an individual who is considered essential to the ongoing operation of the business. In most cases, the insurance coverage is only valid in situations where the loss takes place due to sudden death or disability of the insured party.
Generally, the insurance provider has a set of minimum requirements that must be met before key man insurance is issued for an employee of any company. The business must be able to demonstrate that the employee has such qualities as expertise, creativity, or knowledge and ability that are crucial to the ongoing operation of the company. It is important to note that the insurance coverage is only in effect as long as the individual continues to meet the criteria and remains an important or key element in the business operation.
Not every incident in which a key employee separates from the company is automatically covered by key man insurance. For example, the retirement of a valued employee would not qualify, since the business would have had ample opportunity to prepare for the exit of the employee and find a suitable replacement. It is unusual for insurance providers to cover the sudden dismissal or resignation of a key employee, although there are some exceptions. There are examples of key man insurance that will approve the extension of benefits in the event that a key insured party is convicted of a crime related to the company, such as embezzlement.
Just about all forms of key man insurance will cover sudden death or the loss of a key employee due to a disability incurred from an accident or previously undetected medical issue. The coverage may be in the form of whole life or term life insurance, and often will include a provision or clause that relates specifically to the disbursement of a disability insurance payment to the insured company. As with all forms of life insurance coverage, the premiums will differ, based on factors such as the amount of coverage requested, the type of incidents that are covered in the terms and conditions, and any local laws that impact the issuance of the coverage.
The underlying purpose of key man insurance is to assist the company in maintaining the operation of the business as it seeks to recover from the loss of a key employee. The disbursement from the coverage may be used to pay for outsourcing of functions that the deceased or disabled employee previously handled, at least for a period of time. Many companies use the proceeds from the coverage to temporarily hire consultants to manage the responsibilities while a suitable and permanent replacement is identified.
Already many counties around the world are deploying at all major countries entry points with "body temperature" reading machines to identify and then quarantine suspected swine flu carriers.
As a result all business leaders across the world are restricting travel itineraries and plans of their senior executives and managers, as it could void any key-man insurance coverage.