Jargon Buster - Definition of Key Man Income Protection

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Key Man Income Protection

is a form of key man insurance which pays out a monthly income to the business if the life assured is unable to work due to accident or sickness. The policy works in the same way as an individual income protection policy, however the level of cover is not necessarily determined by a percentage the employee's income. Instead it can be calculated by either a multiple of the employee's income (usually 2-3 times the salary) or a percentage of the company's profit attributed to the employee (usually about 75%).

A Key Man Income Protection Policy will be setup as 'Life of Another', whereby the company is the owner of the policy and the key employee is the life assured. This means that the company will receive the full benefit instead of the employee in the event of a claim.

The employee for such a policy must be somebody who is very important to the business and if was unable to work would cause a financial loss for the business.

Please note that all definitions are intended for general guidance only. For official and current definitions you should always double check your policy wording.

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