Key Person Insurance Coverage Gap Calculator

Convert revenue reliance into an actionable key person insurance target. Provide the revenue influenced by a critical leader, the contribution margin you keep, and the time needed to rebuild production, then add recruiting expenses, debt obligations, and current coverage to reveal the recommended death benefit and any shortfall.

Portion of annual revenue that depends on the executive's relationships, production, or intellectual property.
Blended gross or contribution margin the business retains from the key person's revenue stream.
Months it will take to recruit, onboard, and restore the lost production to prior levels.
Optional. Defaults to $0. Include recruiter fees, sign-on bonuses, relocation, and interim leadership expenses.
Optional. Defaults to $0. Add buy-sell notes, credit lines, or guarantees you want the policy to extinguish.
Optional. Defaults to $0. Enter the death benefit already in force to surface any shortfall.

Use alongside professional insurance and legal advice. Actual coverage needs should consider tax treatment, ownership structure, and policy riders.

Examples

  • $4,500,000 revenue, 32% margin, 18-month recovery, $180,000 recruiting, $750,000 obligations, $2,000,000 existing coverage ⇒ Profit at risk over 18 months: $2,160,000.00 USD • Recruiting and transition costs: $180,000.00 USD • Obligations included: $750,000.00 USD • Recommended key person coverage: $3,090,000.00 USD • Coverage gap versus existing: $1,090,000.00 USD • Monthly profit contribution: $120,000.00 USD • Surplus coverage (if any): $0.00 USD • Contribution margin applied: 32.00%
  • $2,800,000 revenue, 24% margin, 9-month recovery, recruiting blank, obligations blank, existing coverage blank ⇒ Profit at risk over 9 months: $504,000.00 USD • Recruiting and transition costs: $0.00 USD • Obligations included: $0.00 USD • Recommended key person coverage: $504,000.00 USD • Coverage gap versus existing: $504,000.00 USD • Monthly profit contribution: $56,000.00 USD • Surplus coverage (if any): $0.00 USD • Contribution margin applied: 24.00%

FAQ

How do I treat multiple key people?

Run the calculator for each executive separately using the revenue and margin they control, then aggregate the recommended coverage levels to size your overall insurance programme.

Can I include lost strategic momentum or valuation impact?

Yes. Estimate the valuation swing or opportunity cost and add it to the outstanding obligations field so the policy covers both direct and strategic losses.

What if replacement ramp takes longer than expected?

Increase the recovery period input to reflect a longer ramp or model a sensitivity range to stress test how coverage needs climb with extended vacancy.

Should I net out buy-sell coverage?

Keep buy-sell protection separate unless it is dedicated to paying the same obligations. Enter only the key person coverage currently available for operational continuity to avoid double counting.

Additional Information

  • Contribution margin should reflect the profit that disappears when the key person is lost, net of variable costs that also disappear.
  • Recovery period includes recruiting, onboarding, and ramp—longer lead times dramatically increase the insurance requirement.
  • Outstanding obligations account for loans, lines of credit, or investor commitments that the key person's death would trigger immediately.

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