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Q: How do I value a person for key man insurance cover?

Key Person or Key Man Insurance pays a business a lump sum should a key employee become critically ill or pass away.

This type of insurance asks you to name the person whose contribution you want to protect, plus value their impact on the business.

But putting a value on a person can be tricky, how can a quantifiable amount demonstrate someone’s impact on a company?


So how do you value a Key Person in your Business?

There’s no straightforward sum here, each business is too unique for that to give you the accurate and personal figure you’re after. We suggest you start by working through our list below – find a quantifiable figure and add them all together to reach your starting point.

If you would like a hand, or just some advice simply contact us.


What should I consider when valuing a Key Business Man?

  1. Is their contribution directly measurable? 
    If the Key Man works in sales, their contribution could be the exact amount of revenue generated by them.
  2. Is the key person’s contribution to Gross or Net profit of the business?
    As a rule of thumb, Net profit contribution could be twice as valuable as Gross profit contribution.
  3. Are there additional costs associated with recruiting a replacement or cover employee?
    Do you use a recruitment agency to find your staff? What would they charge to find you temporary cover?
  4. Would a replacement or temporary cover employee need training to the same level of the key person?
    Don’t forget to count working hours lost as part of the cost of training.


How do I calculate my Key Person’s value?

At Chase Templeton our advisors have a range or formulas and calculators we’ll work through with you to try and place a value on your Key Person.


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