Loading...
BETA — Comparison Site, Not an Insurer: This website is currently in beta, launching fully in Q2 2026. We are an information and comparison resource only — we are not an insurance provider, broker, or regulated financial adviser. We have no partnerships with insurers and hold no FCA authorisation. All coverage details, pricing, and terms should be verified directly with insurance providers before purchasing. For regulated advice, consult a qualified insurance professional or visit MoneyHelper or the FCA.
Loading...
A guide to calculating the right amount of key person insurance for your business. Includes the main methods, worked examples, and common mistakes.
Our full comparison service launches Q2 2026
Pre-Register for LaunchThere are several accepted methods for calculating how much key person insurance you need:
Take the person's annual contribution to profits and multiply by the number of years it would take to fully recover from their loss (typically 2-5 years).
Example: Key person contributes £150,000/year to profits x 3 years recovery = £450,000 cover
Calculate the revenue the person is directly responsible for, then estimate how long it would take to replace that revenue stream.
Example: Person manages £500,000 of annual client revenue x 2 years to rebuild = £1,000,000 cover
Add up all the costs associated with losing the person:
Here are some illustrative examples of key person insurance calculations:
These are hypothetical examples for illustration. Use our calculator for your own personalised estimate.
Businesses often make these mistakes when deciding how much key person insurance they need:
The relationship between cover amount and premium for key person insurance is roughly linear - double the cover, approximately double the premium. This means:
These are illustrative figures only. Actual premiums depend on age, health, occupation, and cover type. Critical illness cover costs significantly more than life-only cover.
The relatively modest incremental cost means it is usually better to err on the side of slightly more cover than less. Being under-insured defeats the purpose of having key person insurance at all.
To determine the right amount of key person insurance for your business:
The most common method is to multiply the person's annual profit contribution by the number of years it would take to recover (typically 2-5 years), then add recruitment costs and any debts secured against them. Use our calculator for a personalised estimate.
For UK SMEs, cover amounts typically range from £250,000 to £2 million, depending on the person's role, the business size, and any lender or investor requirements. There is no fixed average as every business situation is different.
Most key person insurance policies are set at a fixed cover amount for the term. To increase cover, you would typically need to take out an additional policy. Some providers offer increasing cover options that grow each year to keep pace with inflation. We recommend reviewing your cover needs annually.
Compare key person insurance information and find the right type of cover for your business.
We are a comparison and information resource, not an insurer or broker. For regulated advice, consult a qualified professional.
It is generally better to err slightly on the side of more cover rather than less. Being under-insured partially defeats the purpose of having cover. The incremental cost of additional cover is relatively modest (premiums scale roughly linearly with cover amount), so the difference between £500k and £750k of cover may only be a few pounds per month.