WealthPillar · Free calculator
Key person insurance calculator
Key person insurance is a policy your corporation owns on the life of someone the business depends on, often the owner. If that person dies, the company receives the payout to cover the profit it loses, the cost of finding a replacement and any loans the bank calls. Estimate how much cover your business would need below.
How much would your business lose?
Example figures are filled in. Replace them with your own.
Your estimate
General education only, not advice. Coverage depends on underwriting. WealthPillar is paid by insurer commission.
How this key person insurance calculator works
It uses the loss-of-profit method: what the business would lose, and for how long, if this person were gone.
- Profit they bring in. The yearly profit that depends on this person: the clients who come for them, the work only they can do, the deals they close.
- Time to recover. How many years it would take to hire someone, train them and win the business back. Two to three years is a common planning range.
- Replacement cost. Recruiting fees, a signing bonus, training time and the higher salary a proven replacement may ask for.
- Loans and guarantees. Banks often review or call business loans when an owner who signed a personal guarantee dies.
- Cover already in place. Key person insurance the company already owns on this person.
The result is also shown as a multiple of the person's pay. It is a useful cross-check, because insurers look at how the amount compares with what the person earns and what the business earns when they underwrite the policy.
Who should be insured as a key person?
Anyone whose death would cost the business real money: the owner-manager in most small corporations, a partner who brings in most of the clients, a professional whose licence the business relies on, or a manager who holds the main supplier and bank relationships. For a two-owner company, key person cover is often looked at together with buy-sell cover, which pays for the surviving owner to buy the other owner's shares. The buy-sell calculator works that out.
What this estimate leaves out
- Tax. When a private corporation receives a life insurance payout, much of it can usually be paid out to shareholders through the capital dividend account. How that works for your company is a question for your accountant.
- Who owns and pays. For key person cover the company usually owns the policy, pays the premium and is the beneficiary. Premiums are generally not deductible. Our guide should my corporation pay for my life insurance? covers the setups.
- Disability. A key person is more likely to be off sick than to die before 65. Key person disability cover is a separate policy.
Common questions
How much key person insurance does my business need?
Estimate the profit the business would lose while it replaces the person, add the cost of finding and training a replacement and any loans likely to be called, then subtract cover the company already owns. The insurer will check the amount against the person's pay and the company's finances.
Who pays for key person insurance?
Usually the corporation. It owns the policy, pays the premiums and receives the payout. The insured person has to agree to the policy and go through underwriting.
Can a sole owner have key person insurance?
Yes. In a one-owner corporation the owner is usually the key person. The payout can keep the business running long enough to sell it in an orderly way or wind it down, instead of a forced sale.
Read more on the key person insurance page, or see all of our calculators.
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General education only. Not individualized insurance, financial, tax or legal advice. Figures use 2026 rates and are estimates. All coverage is subject to underwriting and the terms of the policy. WealthPillar is paid by insurer commission.