A key person insurance calculator that shows three methods side by side

Multiple of compensation multiplies salary and benefits by a rule-of-thumb factor, often five to ten. Contribution to profits multiplies the annual profit the person generates by the years to recover. Replacement cost adds recruiting and training, profit lost during the transition and business debts they guarantee. The highest method, minus existing cover, becomes the suggestion.

Showing all three is deliberate. Owners who distrust a single rule of thumb can see that different reasonable approaches land in a range, and the result names the method used for the suggestion.

Insurers apply their own financial underwriting to key person cases, so the amount an insurer will issue may differ. The calculator says so, and the producer's job is to bridge the estimate and what underwriting will accept.

Because it is the step most often missed. For employer-owned life insurance, IRC 101(j) requires the employee to be notified in writing and to consent before the policy is issued, and the business generally files Form 8925 each year. Without compliance, part of the death benefit can become taxable to the business.

The calculator explains this in its definitions so the owner hears it before the producer does. It also explains that key person premiums are generally not deductible when the business is beneficiary, and that a properly documented death benefit is generally received income-tax-free.

Your producer should still involve the client's tax adviser. The calculator and this page give general information, not tax or legal advice.

Life agencies that work with business owners, commercial-lines agencies that want to round out accounts with life coverage, and benefits brokers who already know the owner. Professional practices, agencies, contractors, family businesses and startups with a founder whose relationships drive revenue are natural audiences for the calculator.

A commercial P&C agency with no life department can still embed it and route the leads to a licensed life partner, as long as the lead form and consent language reflect that.

It pairs naturally with buy-sell funding: owners worried about losing a key person are often co-owners who have never funded their agreement.