Distinct from personal life insurance planning — key person insurance is owned by and pays the business itself, sized against what the business stands to lose.
How it works
Coverage need combines the cost to recruit and train a replacement, the profit the business is likely to lose during that transition, and any business debt tied to the key person (such as a personal guarantee).
What this does not include
This doesn’t estimate replacement cost, transition-period lost profit, or debt exposure itself — those figures come from the business’s own specifics, which this calculator combines rather than derives.
How to use this calculator
- Enter estimated replacement cost and lost profit during a transition.
- Enter any business debt tied to this specific person, if applicable.
Frequently asked questions
Who owns a key person policy?
The business itself — it pays the premiums and is the beneficiary, distinct from a policy an individual buys to protect their own family.
Is key person insurance tax-deductible?
Generally no for the premiums, though the death benefit is typically received tax-free by the business — a detail specific tax advice should confirm for a given situation.
Who typically needs key person coverage?
A founder, a top salesperson responsible for a large share of revenue, or a specialist whose knowledge or relationships would be hard to quickly replace.
