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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.
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A complete guide to key person insurance for company directors. Why it matters, how much cover you need, tax implications, and how to arrange it.
Our full comparison service launches Q2 2026
Pre-Register for LaunchCompany directors are frequently the most important key people in a business. Key person insurance for directors is essential because:
The cover amount for director key person insurance should reflect the financial impact of losing that director. Common calculation methods include:
For most SME directors, cover amounts typically range from £250,000 to £2 million+, though this varies significantly by business size and the director's role.
Use our key person insurance calculator to estimate the cover amount you need.
It is important to understand the difference between key person insurance for directors and shareholder protection insurance:
| Feature | Key Person Insurance | Shareholder Protection |
|---|---|---|
| Purpose | Protect business from financial loss | Fund share purchase on death/illness |
| Beneficiary | The business | Surviving shareholders (via trust) |
| What it covers | Lost profits, recruitment, debts | Market value of deceased's shares |
| Used with | Standalone policy | Cross-option agreement |
Many director-shareholders need BOTH types of cover. See our shareholder protection guide for more details.
The tax treatment of director key person insurance depends on the purpose of the policy:
If premiums are tax-deductible, the payout is typically taxable as a trading receipt. If premiums are not deductible, the payout is usually tax-free. See our key person insurance tax guide for full details.
To set up key person insurance for directors:
We recommend using a specialist business protection adviser who understands the legal and tax structuring requirements for director cover.
This key person insurance for directors guide references:
Not necessarily. Key person insurance is most important for directors whose loss would have a significant financial impact on the business - typically those involved in revenue generation, key client relationships, or strategic leadership. Administrative or non-executive directors may be less critical from a financial impact perspective.
Director cover amounts typically range from £250,000 to £2 million+ for SMEs, calculated using a multiple of profit contribution (2-5x), plus loan repayment costs and recruitment expenses. Use our calculator to estimate your specific needs.
It depends on the policy's purpose. If the sole purpose is to protect against loss of profits, premiums may be deductible as a business expense (though the payout would then be taxable). If protecting loan repayment, premiums are typically not deductible but the payout is tax-free. HMRC assesses this case-by-case.
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.
Key person insurance protects the business from financial loss if a director dies or becomes ill - the payout goes to the company. Shareholder protection funds the purchase of a deceased director's shares by surviving shareholders. Many director-shareholders need both types of cover.