Can key person insurance cover temporary or contract workers?

Generally, key person insurance in Australia is designed for permanent employees or business owners rather than temporary or contract workers, though there are some circumstances where contractors might be covered. The fundamental principle is that the key person must be directly associated with the business and their loss must create significant financial impact. For standard contractor or temporary workers, insurers typically won't provide key person coverage because the relationship is temporary and doesn't create the same long-term dependency. However, exceptions may apply for long-term contractors who are integral to operations, essentially function as permanent employees (even if contracted for tax purposes), have specialized skills critical to business revenue, and have a demonstrated multi-year relationship with the business. Some insurers might consider coverage if the contractor works exclusively or primarily for your business and their loss would cause substantial financial hardship. The challenge is demonstrating insurable interest - the business must prove financial dependency on the contractor. For genuine temporary workers or short-term contractors, key person insurance usually isn't available or appropriate. Instead, businesses might manage this risk through contract terms requiring notice periods, knowledge transfer obligations, or professional indemnity insurance. If your business relies heavily on someone classified as a contractor, it's worth discussing with insurers whether coverage is possible, though restructuring the relationship to employment may be necessary. For contractors who are really business partners operating under service agreements, different insurance structures involving partnership insurance or joint venture protection might be more appropriate.