Free key person insurance calculator from Fynvorax. Estimate coverage using salary multiple, revenue impact, and replacement cost methods.
Key person insurance protects against revenue loss if a critical employee dies. Face amount often 5–10× their contribution to profit or replacement cost to hire/train.
Under IRS rules (and similar code in most global territories), if the corporation is the direct owner and beneficiary of the policy, the annual premium payments are NOT tax-deductible. However, because the premiums are paid with post-tax dollars, the lump-sum insurance payout received by the corporation upon death is generally 100% tax-free, ensuring the enterprise receives unencumbered emergency capital.
Term Life policies cover a fixed timeframe (e.g., 5 to 15 years) corresponding to the core expansion cycle or patent execution window of the firm. It is highly affordable and preferred by VC boards. Whole Life covers the entirety of an executive's life and builds cash value, but is exponentially more expensive and is generally used for permanent buy-sell agreements rather than standard operational stability.
Generally not deductible; death benefit often tax-free to the business (U.S.) — structure affects economics.
Estimate lost profit for 12–24 months plus recruitment/training and debt covenants that trigger on key-person events.