Business Protection Calculator
Key person insurance sizing.
Calculate business protection cover needed for key person from profit contribution, replacement time, recruitment, and loans.
What this tool does
This calculator models the lump sum cover amount a business might need if a key person becomes unable to work. It combines three cost factors: the profit shortfall during the recruitment and transition period, the direct cost of hiring and training a replacement, and any outstanding business loans that require servicing. The profit impact—calculated by dividing annual contribution by 12 and multiplying by the replacement timeframe—typically drives the largest portion of the result. The output illustrates a potential cover need based on your inputs; actual requirements vary by business structure, cash reserves, and operational flexibility. This tool is for educational modelling and does not account for investment returns, tax treatment, or alternative funding sources.
Enter Values
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Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
Business protection (key person insurance) covers the financial hit if a critical employee dies or becomes permanently unable to work. Cover includes profit impact during replacement period (12-24 months typical), recruitment costs for replacement, and business loans tied to that person's guarantee or involvement.
200,000 annual profit contribution from key person × 18 months = 300,000 profit impact. Plus 30,000 recruitment cost + 100,000 business loan payoff (if bank requires on death) = 430,000 total cover. Typical cost for healthy 45-year-old: 50-150/month for 10-year level term policy.
Key person protection is different from partnership or shareholder protection. Key person: company receives payout, continues operating. Partnership/shareholder: remaining partners receive funds to buy out deceased's share from their estate. Many businesses need both. the tax authority tax treatment: premiums usually deductible, payouts usually trading receipt (check with accountant for edge cases).
A worked example
Try the defaults: annual profit contribution of 200,000, replacement time of 18 months, recruitment cost of 30,000, business loans balance of 100,000. The tool returns 430,000.00. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.
What moves the number most
The result responds to Annual Profit Contribution, Replacement Time (months), Recruitment Cost, and Business Loans Balance. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.
The formula behind this
Profit impact = (annual profit ÷ 12) × replacement months. Total = impact + recruitment + loans. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.
What the score tells you
Headline financial numbers — income, savings, debt — each tell part of the story. This calculation stitches several together into a single read you can track over time. The value is in the direction, not the absolute number.
What this doesn't capture
The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.
££200,000/yr profit × 18mo + ££30,000 + ££100,000 = 430,000.00.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
This calculator computes the recommended key person insurance cover amount by combining three cost components. First, it calculates the profit impact during replacement by dividing the annual profit contribution by 12 and multiplying by the number of months required to recruit and train a replacement. Second, it adds the direct recruitment costs associated with hiring and onboarding. Third, it includes any outstanding business loan balances that would need servicing during the transition period. The model treats profit contribution as constant across all months and assumes a linear relationship between replacement time and lost profit. It does not account for partial recovery of duties, revenue from interim management, changes in loan obligations, tax implications, or market-dependent variations in business performance.
Frequently Asked Questions
Who is a 'key person'?
Key person vs shareholder protection?
Tax treatment?
How to value key person profit contribution?
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