How Much Keyman Cover Does Your Business Need? UK Calculator + Examples (2026)

There is no single right answer to how much keyman insurance cover a UK business needs — but there are three industry-standard methods, all accepted by every major UK insurer. Pick the one that best matches the business risk you are insuring against, document it in a board minute, and apply for the resulting sum assured. This guide walks you through each method with worked examples.

Quick facts: the three methods

• Multiple of salary — quick, conservative, easy to defend
• Multiple of gross profit contribution — most accurate for revenue-generating roles
• Outstanding loan / guarantee value — protects lender and family from PG calls

Method 1 — multiple of salary

The simplest method. Take the key person’s gross annual salary (including bonuses but not dividends) and multiply by 5–10. The lower end is appropriate when the role is replaceable in the medium term; the upper end when the role is genuinely irreplaceable.

Example: Sales Director on £85,000 + £15,000 bonus = £100,000 gross. Multiplier 5 = £500,000 cover. Multiplier 10 = £1,000,000 cover.

Method 2 — multiple of gross profit contribution

The most accurate method for revenue-generating roles. Take the gross profit the key person personally generates each year and multiply by 1–3. Use 1× for short replacement timeframes, 3× for hard-to-replace technical or relationship roles.

Example: Founder personally generates £400,000 of gross profit per year through customer relationships. Multiplier 2 = £800,000 cover.

This is the industry-standard method for revenue-led founders and senior commercial roles.

Method 3 — outstanding debt / personal guarantee

The defensive method. Total up the company debt the key person has personally guaranteed (overdraft, commercial mortgage, equipment finance, GGS or UBL facilities). Insure that amount as a minimum.

Example: Director has personally guaranteed a £400,000 GGS loan, £50,000 overdraft and £35,000 of equipment finance. Total: £485,000. Cover: £500,000.

Combining methods

Many SMEs combine. A typical owner-managed practice might add: 2× gross profit contribution (£600,000) + outstanding mortgage (£300,000) = £900,000 cover. The combined number reflects both the trading loss and the debt clear-down.

Worked example 1 — tech startup

Worked example 2 — professional services partner

Worked example 3 — owner-managed retail

What about indexation?

Most UK insurers offer RPI/CPI-linked indexation for a small premium uplift (~5–15%). Worth taking if you expect the role’s value to grow with inflation over a long term.

Documenting the cover decision

For HMRC deductibility certainty, document in a board minute:

• Who is being insured
• Their role and contribution
• The method used to calculate the sum assured
• The trading loss the cover is designed to compensate

This is your defence if HMRC ever asks under the Anderson principles. See Keyman insurance and corporation tax.

Get a quote based on your calculation

Once you have your number, run it through the keyman insurance quote form — you will have indicative quotes from the major UK insurers within a working day.

Related guides

• Keyman insurance UK cost 2026
• How to get a keyman insurance quote
• Keyman insurance policy explained
• Key person protection for limited companies

Frequently asked questions

What is the standard formula for keyman insurance cover?

The three industry-standard methods are 5–10× salary, 1–3× gross profit contribution, or the value of company debt personally guaranteed. Pick the most appropriate to your trading risk.

Can I insure for more than the standard formulas suggest?

Yes — insurers will write to whatever you can financially justify, but for HMRC deductibility the sum should be defensible against the “wholly to compensate trading loss” test.

Should I insure for the founder’s full company valuation?

No — that conflates trading risk with capital value. Capital value is a shareholder protection issue, not keyman.

Does the cover need to match the loan term exactly?

It is best practice to match or exceed the term of the debt being protected, so the cover does not expire mid-loan.

Can I increase cover later if the business grows?

Yes — either via indexation (built-in growth) or via “guaranteed insurability options” that let you increase cover at later life events without further underwriting.

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