diff --git a/api/profile/profile.go b/api/profile/profile.go
index 58a2132659351..5746ac19bb61a 100644
--- a/api/profile/profile.go
+++ b/api/profile/profile.go
@@ -96,6 +96,9 @@ type Profile struct {
 	// MFAMode ("auto", "platform", "cross-platform").
 	// Equivalent to the --mfa-mode tsh flag.
 	MFAMode string `yaml:"mfa_mode,omitempty"`
+
+	// PrivateKeyPolicy is a key policy enforced for this profile.
+	PrivateKeyPolicy keys.PrivateKeyPolicy `yaml:"private_key_policy"`
 }
 
 // Copy returns a shallow copy of p, or nil if p is nil.
diff --git a/api/utils/keys/yubikey.go b/api/utils/keys/yubikey.go
index ce350f18232c0..b7d2759e0beb4 100644
--- a/api/utils/keys/yubikey.go
+++ b/api/utils/keys/yubikey.go
@@ -288,7 +288,7 @@ func (y *yubiKey) generatePrivateKey(slot piv.Slot, touchPolicy piv.TouchPolicy)
 	}
 
 	// Create a self signed certificate and store it in the PIV slot so that other
-	// Teleport Clients know to reuse the stored key instead of genearting a new one.
+	// Teleport Clients know to reuse the stored key instead of generating a new one.
 	priv, err := yk.PrivateKey(slot, pub, piv.KeyAuth{})
 	if err != nil {
 		return nil, trace.Wrap(err)
diff --git a/lib/client/api.go b/lib/client/api.go
index 4f55e339b4bd0..7ffe581b5c098 100644
--- a/lib/client/api.go
+++ b/lib/client/api.go
@@ -590,6 +590,7 @@ func (c *Config) LoadProfile(ps ProfileStore, proxyAddr string) error {
 	c.KeysDir = profile.Dir
 	c.AuthConnector = profile.AuthConnector
 	c.LoadAllCAs = profile.LoadAllCAs
+	c.PrivateKeyPolicy = profile.PrivateKeyPolicy
 	c.AuthenticatorAttachment, err = parseMFAMode(profile.MFAMode)
 	if err != nil {
 		return trace.BadParameter("unable to parse mfa mode in user profile: %v.", err)
@@ -629,6 +630,7 @@ func (c *Config) SaveProfile(makeCurrent bool) error {
 		AuthConnector:     c.AuthConnector,
 		MFAMode:           c.AuthenticatorAttachment.String(),
 		LoadAllCAs:        c.LoadAllCAs,
+		PrivateKeyPolicy:  c.PrivateKeyPolicy,
 	}
 
 	if err := c.ClientStore.SaveProfile(p, makeCurrent); err != nil {
@@ -3016,11 +3018,6 @@ func (tc *TeleportClient) Login(ctx context.Context) (*Key, error) {
 		return nil, trace.Wrap(err)
 	}
 
-	// Set private key policy from ping response if not already set.
-	if tc.PrivateKeyPolicy == "" {
-		tc.PrivateKeyPolicy = pr.Auth.PrivateKeyPolicy
-	}
-
 	key, err := tc.SSHLogin(ctx, sshLoginFunc)
 	if err != nil {
 		return nil, trace.Wrap(err)
@@ -3182,7 +3179,7 @@ type SSHLoginFunc func(context.Context, *keys.PrivateKey) (*auth.SSHLoginRespons
 // SSHLogin uses the given login function to login the client. This function handles
 // private key logic and parsing the resulting auth response.
 func (tc *TeleportClient) SSHLogin(ctx context.Context, sshLoginFunc SSHLoginFunc) (*Key, error) {
-	priv, err := tc.GetNewLoginKey(ctx, tc.PrivateKeyPolicy)
+	priv, err := tc.GetNewLoginKey(ctx)
 	if err != nil {
 		return nil, trace.Wrap(err)
 	}
@@ -3195,7 +3192,8 @@ func (tc *TeleportClient) SSHLogin(ctx context.Context, sshLoginFunc SSHLoginFun
 			fmt.Fprintf(tc.Stderr, "Unmet private key policy %q.\n", privateKeyPolicy)
 
 			// Set the private key policy to the expected value and re-login.
-			priv, err = tc.GetNewLoginKey(ctx, privateKeyPolicy)
+			tc.PrivateKeyPolicy = privateKeyPolicy
+			priv, err = tc.GetNewLoginKey(ctx)
 			if err != nil {
 				return nil, trace.Wrap(err)
 			}
@@ -3241,39 +3239,23 @@ func (tc *TeleportClient) SSHLogin(ctx context.Context, sshLoginFunc SSHLoginFun
 }
 
 // GetNewLoginKey gets a new private key for login.
-func (tc *TeleportClient) GetNewLoginKey(ctx context.Context, keyPolicy keys.PrivateKeyPolicy) (*keys.PrivateKey, error) {
-	key, err := tc.LocalAgent().GetCoreKey()
-	if err == nil {
-		// If we find an existing key with a non-zero key polic and it meets
-		// the given keyPolicy requirement, then we should use the existing key.
-		if coreKeyPolicy := keys.GetPrivateKeyPolicy(key.PrivateKey); coreKeyPolicy != keys.PrivateKeyPolicyNone {
-			if err := keyPolicy.VerifyPolicy(coreKeyPolicy); err == nil {
-				return key.PrivateKey, nil
-			}
-		}
-	} else if !trace.IsNotFound(err) {
-		return nil, trace.Wrap(err)
-	}
-
-	switch keyPolicy {
-	case keys.PrivateKeyPolicyHardwareKey, keys.PrivateKeyPolicyHardwareKeyTouch:
+func (tc *TeleportClient) GetNewLoginKey(ctx context.Context) (priv *keys.PrivateKey, err error) {
+	switch tc.PrivateKeyPolicy {
+	case keys.PrivateKeyPolicyHardwareKey:
 		log.Debugf("Attempting to login with YubiKey private key.")
-
-		priv, err := keys.GetOrGenerateYubiKeyPrivateKey(keyPolicy == keys.PrivateKeyPolicyHardwareKeyTouch)
-		if err != nil {
-			return nil, trace.Wrap(err)
-		}
-		return priv, nil
+		priv, err = keys.GetOrGenerateYubiKeyPrivateKey(false)
+	case keys.PrivateKeyPolicyHardwareKeyTouch:
+		log.Debugf("Attempting to login with YubiKey private key with touch required.")
+		priv, err = keys.GetOrGenerateYubiKeyPrivateKey(true)
 	default:
 		log.Debugf("Attempting to login with a new RSA private key.")
+		priv, err = native.GeneratePrivateKey()
+	}
 
-		// Generate a new standard key.
-		priv, err := native.GeneratePrivateKey()
-		if err != nil {
-			return nil, trace.Wrap(err)
-		}
-		return priv, nil
+	if err != nil {
+		return nil, trace.Wrap(err)
 	}
+	return priv, nil
 }
 
 // new SSHLogin generates a new SSHLogin using the given login key.
@@ -3780,6 +3762,11 @@ func (tc *TeleportClient) applyProxySettings(proxySettings webclient.ProxySettin
 // authentication settings, overriding existing fields in tc.
 func (tc *TeleportClient) applyAuthSettings(authSettings webclient.AuthenticationSettings) {
 	tc.LoadAllCAs = authSettings.LoadAllCAs
+
+	// Update the private key policy from auth settings if it is stricter than the saved setting.
+	if authSettings.PrivateKeyPolicy != "" && authSettings.PrivateKeyPolicy.VerifyPolicy(tc.PrivateKeyPolicy) != nil {
+		tc.PrivateKeyPolicy = authSettings.PrivateKeyPolicy
+	}
 }
 
 // AddTrustedCA adds a new CA as trusted CA for this client, used in tests
diff --git a/lib/client/client_store.go b/lib/client/client_store.go
index 4278ec6ee2096..02ccb1be516df 100644
--- a/lib/client/client_store.go
+++ b/lib/client/client_store.go
@@ -148,9 +148,10 @@ func (s *Store) ReadProfileStatus(profileName string) (*ProfileStatus, error) {
 	}
 	key, err := s.GetKey(idx, WithAllCerts...)
 	if err != nil {
-		if trace.IsNotFound(err) {
-			// If we can't find a key to match the profile, return a partial status. This
-			// is used for some superficial functions `tsh logout` and `tsh status`.
+		if trace.IsNotFound(err) || trace.IsConnectionProblem(err) {
+			// If we can't find a key to match the profile, or can't connect to
+			// the key (hardware key), return a partial status. This is used for
+			// some superficial functions `tsh logout` and `tsh status`.
 			return &ProfileStatus{
 				Name: profileName,
 				Dir:  profile.Dir,
diff --git a/lib/teleterm/clusters/cluster_auth.go b/lib/teleterm/clusters/cluster_auth.go
index bb4a8fded683b..01dae78355841 100644
--- a/lib/teleterm/clusters/cluster_auth.go
+++ b/lib/teleterm/clusters/cluster_auth.go
@@ -161,8 +161,6 @@ func (c *Cluster) updateClientFromPingResponse(ctx context.Context) (*webclient.
 		return nil, trace.Wrap(err)
 	}
 
-	c.clusterClient.PrivateKeyPolicy = pingResp.Auth.PrivateKeyPolicy
-
 	return pingResp, nil
 }
 
diff --git a/tool/common/common.go b/tool/common/common.go
index 4222b765479ff..d72c9028cbae6 100644
--- a/tool/common/common.go
+++ b/tool/common/common.go
@@ -111,6 +111,7 @@ func ShowClusterAlerts(ctx context.Context, client ClusterAlertGetter, w io.Writ
 	// get any "on login" alerts
 	alertCtx, cancelAlertCtx := context.WithTimeout(ctx, constants.TimeoutGetClusterAlerts)
 	defer cancelAlertCtx()
+
 	alerts, err := client.GetClusterAlerts(alertCtx, types.GetClusterAlertsRequest{
 		Labels:   labels,
 		Severity: minSeverity,
diff --git a/tool/tsh/tsh.go b/tool/tsh/tsh.go
index ea5f8bb63e373..f642ff7044ba7 100644
--- a/tool/tsh/tsh.go
+++ b/tool/tsh/tsh.go
@@ -55,6 +55,7 @@ import (
 	"github.com/gravitational/teleport/api/types"
 	apievents "github.com/gravitational/teleport/api/types/events"
 	"github.com/gravitational/teleport/api/types/wrappers"
+	"github.com/gravitational/teleport/api/utils/keys"
 	"github.com/gravitational/teleport/lib/asciitable"
 	"github.com/gravitational/teleport/lib/auth"
 	wancli "github.com/gravitational/teleport/lib/auth/webauthncli"
@@ -1731,10 +1732,16 @@ func onLogin(cf *CLIConf) error {
 	}
 
 	// Show on-login alerts, all high severity alerts are shown by onStatus
-	// so can be excluded here.
+	// so can be excluded here, except when Hardware Key Touch is required
+	// which skips on-status alerts.
+	alertSeverityMax := types.AlertSeverity_MEDIUM
+	if tc.PrivateKeyPolicy == keys.PrivateKeyPolicyHardwareKeyTouch {
+		alertSeverityMax = types.AlertSeverity_HIGH
+	}
+
 	if err := common.ShowClusterAlerts(cf.Context, tc, os.Stderr, map[string]string{
 		types.AlertOnLogin: "yes",
-	}, types.AlertSeverity_LOW, types.AlertSeverity_MEDIUM); err != nil {
+	}, types.AlertSeverity_LOW, alertSeverityMax); err != nil {
 		log.WithError(err).Warn("Failed to display cluster alerts.")
 	}
 
@@ -3242,7 +3249,7 @@ func makeClientForProxy(cf *CLIConf, proxy string, useProfileLogin bool) (*clien
 	// be found, or the key isn't supported as an agent key.
 	if profileSiteName != "" {
 		if err := tc.LoadKeyForCluster(profileSiteName); err != nil {
-			if !trace.IsNotFound(err) {
+			if !trace.IsNotFound(err) && !trace.IsConnectionProblem(err) {
 				return nil, trace.Wrap(err)
 			}
 			log.WithError(err).Infof("Could not load key for %s into the local agent.", profileSiteName)
@@ -3584,9 +3591,13 @@ func onStatus(cf *CLIConf) error {
 		return nil
 	}
 
-	if err := common.ShowClusterAlerts(cf.Context, tc, os.Stderr, nil,
-		types.AlertSeverity_HIGH, types.AlertSeverity_HIGH); err != nil {
-		log.WithError(err).Warn("Failed to display cluster alerts.")
+	if tc.PrivateKeyPolicy == keys.PrivateKeyPolicyHardwareKeyTouch {
+		log.Debug("Skipping cluster alerts due to Hardware Key Touch requirement.")
+	} else {
+		if err := common.ShowClusterAlerts(cf.Context, tc, os.Stderr, nil,
+			types.AlertSeverity_HIGH, types.AlertSeverity_HIGH); err != nil {
+			log.WithError(err).Warn("Failed to display cluster alerts.")
+		}
 	}
 
 	return nil