Key Person Insurance Calculator

Background.

Use Key Person Insurance Calculator when you need to size a business continuity gap from profit contribution, replacement horizon, transition cost and existing coverage. Key-person insurance is owned by the business to offset financial harm from the death or disability of a critical person. Here the arithmetic follows “additional coverage need = max(annual profit contribution × replacement years + transition costs − existing coverage, 0),” rather than silently mixing alternatives.

The editable entries are annual profit contribution attributable to key person, years to recruit, replace and recover, recruiting and transition costs, existing key-person coverage. Use values from the document or measurement that governs this key person insurance question; the defaults are only the worked fixture below. The most consequential input mistake would be to ignore that valuation method, insurable interest, policy type, tax treatment and lender requirements need professional review.

NAIC, Life Insurance buyer guidance; term, permanent coverage and policy values documents the convention or governing rule used here. The key person insurance output is a transparent scenario under those facts: it does not manufacture an unentered market price, professional determination, carrier quote, legal eligibility finding or locally adopted code value.

What is key person insurance calculator?

Key Person Insurance is the relationship behind this decision: key-person insurance is owned by the business to offset financial harm from the death or disability of a critical person. On this page it means additional coverage need = max(annual profit contribution × replacement years + transition costs − existing coverage, 0). Valuation method, insurable interest, policy type, tax treatment and lender requirements need professional review; that is the line between the reported quantity and a broader insurance analysis.

How to use this calculator.

1. 01Confirm that “additional coverage need = max(annual profit contribution × replacement years + transition costs − existing coverage, 0)” matches the key person insurance convention you need.
2. 02Replace the fixture values for annual profit contribution attributable to key person, years to recruit, replace and recover, recruiting and transition costs, existing key-person coverage with dated values from the governing record.
3. 03Keep all currencies, measurement units and time periods on the same basis before calculating.
4. 04Read additional key-person coverage need together with this boundary: Valuation method, insurable interest, policy type, tax treatment and lender requirements need professional review.

The formula.

The calculation uses additional coverage need = max(annual profit contribution × replacement years + transition costs − existing coverage, 0). In this key person insurance model, the entered terms are annual profit contribution attributable to key person, years to recruit, replace and recover, recruiting and transition costs, existing key-person coverage. Key-person insurance is owned by the business to offset financial harm from the death or disability of a critical person, which is why the relationship is presented under this name rather than as a universal alternative. Valuation method, insurable interest, policy type, tax treatment and lender requirements need professional review. Calculations keep full decimal precision through the relationship and round only the returned display values.

A worked example.

Frequently asked questions.

References& sources.

1. [1]NAIC, Life Insurance buyer guidance; term, permanent coverage and policy values. Retrieved 2026-08-07. access: open unless marked otherwise.
2. [2]National Association of Insurance Commissioners. Consumer insurance resources. Retrieved 2026-08-07. independence: primary; access: open.
3. [3]U.S. Internal Revenue Service. Publication 525, Taxable and Nontaxable Income. Retrieved 2026-08-07. independence: primary; access: open.