“Keyman Insurance” in Perspective

The label “keyman insurance” is but just a generic term, like “life insurance”. The only difference between the two is that the subject of the insurance contract in the latter is any person; whereas in the case of the former, well, it is a “keyman” – however it is defined.

Interestingly, in respect of the applications of life insurance for business, there is a long list of application concepts where the life insured is invariably a “keyman”. So how should one go about distinguishing one “keyman insurance” from another?

And in case you are thinking about the policy ownership, the answer is “no” as it is also not a defining characteristic since many applications of life insurance for business where the life insured is a “keyman” need not necessarily be owned by the business enterprise. Please see the table following table:

This article is not about the definition of “keyman insurance”. It is about how confusing and unhelpful it can be when a financial services practitioner engages his/her prospect/client or and when he/she is communicating with underwriters.

Hence, sales practitioners should want to seriously consider dropping the term “keyman insurance”. They should instead embrace and use functional labels such the examples mentioned in the above table if they want to avoid miscommunication.

Finally, please do note that the types of insurance listed in the table above are not an exhaustive list of all the applications of life insurance for business. Excluded in the above list includes 3 types of equity settlement insurance, 2 types of exit recovery insurance and what is known as post-succession continuity insurance, which together fall into the category of Equity-owner Benefit Insurance. And by the way, save for non-working owners, the life insured of all these insurance are invariably a “keyman” of the business enterprise.

If you like to know more, our Chief Trainer would be delighted to assist. Talk to him.