Understanding how keyman insurance works

"Life insurance isn't meant for people who die. Life insurance is meant for people who live." Who said this doesn't really matter, what matters is that there is an important lesson to learn from this. The basic tenet of life is to indemnify the survivors against financial loss. keyman is one such type of insurance.

keyman can be defined as an insurance policy where the proposer as well as the premium payer is the employer, the life to be insured is that of the employee and the benefit, in case of claim, goes to the employer.

The keyman here would be any person employed by a company having a special skill set or substantial responsibilities and who contribute significantly to the profits of the organization.

In case of an unfortunate eventuality to the keyman, two types of losses can arise
A] Loss arising from profit reduction for the company and
B] Costs for the company in replacing the keyman.

Various types of life insurance policies are available in the market today. Both endowment policy and term policy can be bought under keyman insurance. Some companies even offer ULIPs under keyman insurance.