Key man insurance is insurance purchased on the life of an employer or owner of a company. The purpose of a key man insurance plan is to cover the loss or expenses incurred as a result of the death of a key employee.

Some examples of loss or expenses are:

*Lost sales or revenue
*Hiring of interim employee until a permanent replacement is found.
*Costs associated with hiring and training a replacement employee.

Here is an example of the loss or expense incurred from the death of a key individual:

*$30,000 estimated lost revenue and sales
*$75,000 independent contractor costs as a temporary replacement
*$100,000 recruiter fees, advertising, and training of new employee
would then suggest that $205,000 of insurance should be purchased on the key employee.

Term life insurance is generally appropriate for key man insurance as the insurance may only be required until the retirement of the employee. Occasionally the insurance policy is provided to the employee upon their retirement at which point they could convert it to permanent insurance (depending upon the policy).

Key Man insurance is also referred to as Key Man Life Insurance and Key Person Life Insurance.