Key Person Life Insurance Calculator
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About Key Person Life Insurance
Key person insurance is a life or disability insurance policy that a business purchases on a critical employee — the founder, top salesperson, or specialist whose absence would severely impact the company. The business pays the premiums and is the beneficiary of the policy. If the key person dies or becomes disabled, the insurance payout gives the company time to recruit, train a replacement, and stabilize operations. Lenders and investors often require key person coverage as a condition of financing. Three methods are commonly used to determine the right coverage amount: a multiple of salary, the revenue the person generates, or the total cost to replace them.
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Frequently Asked Questions
Who qualifies as a key person?
A key person is any employee whose death or disability would cause significant financial harm to the business — founders, CEOs, top salespeople, chief scientists, or any individual with unique expertise or client relationships critical to revenue.
Is key person insurance tax deductible?
Generally, key person insurance premiums are not tax deductible. However, the death benefit is typically received tax-free by the business. Consult a tax advisor for your specific situation.
What type of life insurance is used for key person policies?
Most key person policies use term life insurance for cost efficiency. Some businesses use permanent life insurance (whole or universal life) to build cash value that can be accessed during the person's working years.
Does key person coverage require the employee's consent?
Yes. The key person must consent in writing to the policy. In some states, additional disclosure requirements apply. The insured employee may also need to undergo a medical exam.
Can key person insurance cover disability as well as death?
Yes, key person disability insurance covers the business if the key person becomes disabled and unable to work. This is often considered more likely than death during working years and may be equally important to carry.
Results are estimates only. Actual premiums depend on underwriting factors specific to your business. Consult a licensed insurance professional for an accurate quote.
How to Use This Calculator
- Enter your details — Fill in the required fields above with your personal or policy information. The more accurate your inputs, the better your estimate.
- Review your results — Your estimate appears instantly as you complete the form. Check the breakdown to understand how each factor affects your numbers.
- Compare and take action — Use the results to compare options, discuss with your insurance agent, or make informed decisions about your coverage needs.
Common Use Cases
- Shopping for a new policy — Get a baseline estimate before requesting quotes from multiple insurers so you know what to expect and can negotiate effectively.
- Reviewing coverage at renewal — Compare your current costs against what this calculator suggests to identify potential savings or coverage gaps before your policy renews.
- Financial planning and budgeting — Factor insurance costs into your monthly budget or long-term financial plan with realistic estimates rather than guesswork.