Key Person Insurance Calculator
How much would your business lose if a key person died or could no longer work? Start with the profit at risk, the time needed to recover and the extra cost of finding a replacement. This calculator turns those assumptions into an illustrative funding gap.
It estimates a business need, not a premium or an amount an insurer has agreed to cover. For policy options, see our Key Person Insurance guide.
Estimate your business’s funding gap
How the calculation works
Estimated lost profit = annual gross profit × percentage at risk × recovery months ÷ 12. Add additional recruitment and recovery costs, then subtract cash allocated to this loss. A negative funding gap is shown as £0.
The model assumes a constant rate of profit loss throughout the period. If the impact would reduce over time, use a reasonable average percentage or work through a more detailed forecast with your accountant. The result is before any tax on a claim and does not include an automatic tax uplift.
Worked example: £140,000 funding gap
A business has £200,000 annual gross profit and estimates that 40% is at risk for 18 months. Lost profit is £120,000. Add £30,000 recruitment costs and £10,000 other recovery costs, then deduct £20,000 available cash: the illustrative gap is £140,000.
Why salary alone can be misleading
A director taking a modest salary may still generate a large share of the company’s profit. A salary multiple can be a useful cross-check, but a fixed 10× life cover or 5× critical illness figure is not a universal recommendation or an underwriting rule.
Consider death and serious illness separately: the recovery period, replacement plan and available cash may differ. Run a separate scenario for each. Critical illness cover only pays for a condition meeting the policy definition; it does not cover every absence from work.
Before choosing a sum assured
- Check the assumptions with the people responsible for the business’s accounts and continuity plan.
- Separate trading losses from debts or shareholder purchase costs already covered elsewhere.
- Consider whether a claim could be taxable and whether a higher gross benefit would be needed.
- Expect financial underwriting: evidence of the person’s role, earnings and contribution may be needed.
For borrowing, use the Loan Cover Calculator. For an owner’s share value, see Shareholder Protection.
Discuss your Key Person coverFrequently asked questions
Does this calculator recommend an exact amount of cover?
No. It estimates a funding gap from your assumptions. The appropriate benefit also depends on policy purpose, tax treatment, existing cover and financial underwriting.
Should I use turnover or gross profit?
Use gross profit for this model. Turnover includes costs that may stop if sales are lost, so using it can overstate the business’s loss. Ask your accountant which figure and adjustments suit your business.
Can I use the same estimate for life and critical illness cover?
Run separate scenarios. Death and serious illness can produce different periods of disruption and different replacement costs. The policy definitions and available benefits also differ.
Does the estimate include tax on a claim?
No. It is a funding gap before claim tax. Tax treatment depends on the purpose and circumstances of the policy and should be checked before setting the insured benefit.
Method reviewed: 4 November 2026. General guidance for UK businesses.