We are licensed insurance brokers, not CPAs or attorneys. Calculator results are educational estimates, not quotes, approvals or tax advice. Confirm tax and legal points with your own CPA or attorney.
Key person insurance calculator
An educational estimate that runs in your browser. Nothing you type here is sent to us.
| Compensation method: pay times the multiple you picked | |
| Profit method: profit at risk while the business recovers | |
| Replacement method: hiring and ramp-up cost plus guaranteed debt | |
| Common carrier guideline (about 5x to 10x compensation) |
The three methods answer different questions and can overlap, so compare them rather than adding them up. What a carrier approves depends on the person's age and health, the business's financials and other coverage in force.
What this number means: Three ways to size coverage for what this person is worth to the business, so you can compare them.
What it does not mean: An amount a carrier has approved, or a recommendation. The person's age and health, the business's financials and other coverage in force decide what can be issued.
Your numbers stay on this page. If you want Erik to see them, add them to the notes in your request.
Enter the key person's pay and what the business would lose. The calculator shows three planning scenarios that advisors and underwriters use: a multiple of total compensation, the profit at risk while the business recovers, and the cost to replace the person plus any debt they guarantee. Compare them with the common 5x to 10x compensation carrier guideline to pick a defensible amount to quote. None of them is a carrier approval.
Want the reasoning behind each method? Read how to value key person insurance →
How the three methods work
- Compensation multiple: total pay times a factor. Carrier guidelines for key person coverage commonly run around 5 to 10 times compensation; one large carrier describes 10 times as its standard and considers 15 to 20 times for well-established businesses with documentation.
- Lost profit: yearly net profit times the share that depends on this person, times the years to recover. It ties coverage to the real financial hit, but both inputs are estimates.
- Replacement cost plus debt: recruiting, a higher salary for an experienced hire, training and lost productivity, plus loans or leases the person guarantees.
The methods answer different questions and can overlap, so they are compared rather than added. Underwriters want a figure you can explain. The full explanation, with a worked example, is in how to value a key person.
After you have a number
- Choose term length to match how long the business depends on the person (often 10 to 20 years).
- Get the employee's written 101(j) notice and consent before the policy is issued; see the 101(j) rule.
- Remember premiums are not deductible when the business is the beneficiary; see is key person insurance deductible?
- Consider key person disability coverage too; see key person disability.
Frequently asked questions
How much key person insurance can a business get?
It varies by carrier. Published guidelines commonly run around 5 to 10 times the person's total compensation, and some carriers consider more for established businesses that document the person's contribution. The business's financials and the person's age and health also matter.
Is this calculator a quote?
No. It shows planning scenarios for the coverage amount. The price depends on the insured's age, health and tobacco use, the term length and the carrier, and the amount depends on underwriting. Use the form to talk it through with Erik.
Start your life insurance request
Tell us what the coverage is for and who it would cover. For most requests we ask for each person's date of birth and sex so Erik can prepare for the call. We do not ask health or tobacco questions in this initial request. This is a request for help, not an insurance application or a promise of coverage.
Written by Erik Moran
Erik co-owns Moran Insurance Group with Amanda Moran and handles the agency's life insurance cases, from key person and buy-sell coverage to trust-owned policies. He works alongside clients' CPAs and attorneys, who make the tax and legal calls. More about Erik.
Sources
Moran Insurance Group is a licensed insurance agency. Our brokers are not CPAs, attorneys or tax advisors, and nothing on this page is tax, legal or investment advice. Tax figures and rules reflect our understanding as of October 2026 and can change. Coverage is subject to carrier underwriting and state availability. Confirm anything tax or legal with a licensed CPA or attorney before you act on it.