Key Person Insurance
A life or disability insurance policy purchased by a business on a critical employee or owner whose death or incapacitation would cause significant financial harm to the company.
Overview
Key Person Insurance (also called Key Man Insurance) protects a business against the financial impact of losing a critical individual — whether through death, disability, or incapacitation. The business owns the policy, pays the premiums, and receives the benefit. The funds help the company survive the transition period, recruit a replacement, or cover lost revenue.
Relevance to COI Compliance
While key person insurance is not a standard requirement in vendor COI programs, it becomes relevant when contracting with small firms where a single individual is essential to the project. If your subcontractor is a one-person specialty firm and that person becomes unable to work, key person coverage on your own side can offset the cost of finding and onboarding a replacement.
When to Consider
General contractors working with specialty subcontractors on long-duration projects should evaluate key person risk. It is more of a business continuity concern than a traditional insurance requirement, but understanding it helps round out a comprehensive risk management program.
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