Key Person Insurance Calculator

Methodology

1. Revenue contribution at risk = estimated annual revenue contribution × disruption months ÷ 12
2. Less compensation not paid while the role is vacant = annual compensation × recruiting months ÷ 12 (recruiting months are capped at the disruption period)
3. Recruiting and replacement cost = the one-time amount you enter
4. Debt tied to the individual = the amount you enter
5. Less existing coverage
6. Midpoint = the sum of the rows above, never below zero; illustrative range = midpoint ± 25%

Assumptions

• The business stops paying the person's compensation while the role is vacant. If it would keep paying (for example under an agreement), set recruiting time to 0.
• The person's revenue contribution is lost for the whole disruption period you enter. Revenue is not profit.
• No multiple of compensation is applied. This tool uses only the amounts you enter.
• Compensation is subtracted here: the business stops paying the person while the role is vacant. The Business Life Insurance Needs Calculator adds the owner's compensation instead, on its assumption that someone must be paid to perform the owner's role during the transition. Each tool's figure follows its own stated assumption.

Limitations

• This simplified sum assumes the amounts entered are independent, available in full and measured consistently. It does not model taxes, policy terms, underwriting, valuation disputes, double counting or timing. Revenue is not profit. Verify inputs with your advisers.
• When the compensation offset is larger than the other amounts entered, net of existing coverage, the midpoint is $0. A role valued for reasons other than the revenue entered is not captured by this tool.
• Educational illustration only. Not a quote, actuarial calculation, tax or legal advice, or individualized financial or insurance recommendation.
• Structure, ownership and tax treatment should be confirmed with qualified tax, legal and insurance professionals.

Methodology version 1.2.0, 2026-10-13.