Keyman insurance pays the business, not the family, when a person it depends on dies. This keyman insurance calculator sizes that cover the way the exposure actually builds up: the profit the business would lose while it rebuilds, the loans tied to that person, the cost of replacing them, and the tax the business pays on the claim. Figures are in ₹ lakh.
Step 1
What the business would lose
The part of yearly profit that would fall away without them: clients they bring, work only they can do, deals they close.
Typically 2 to 3 years. Use more for a founder-led or highly technical business.
Term loans and working-capital limits where they are the promoter or guarantor, which a lender might review or recall.
Search costs, the higher salary a replacement will want, and the handover period.
Step 2
Tax on the claim
A keyman claim is taxable business income, so the cover is grossed up to leave the full amount after tax. Company rate assumes the 22% concessional regime with surcharge and cess; firm and LLP rate is 30% plus cess, with 12% surcharge above ₹1 crore of income.
Step 3 · Optional
What is already in place
Insurers cap keyman cover using their own financial underwriting, usually a multiple of the person's remuneration or of the business's average profit. Leave blank if you don't know it.
Suggested keyman cover
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Already covered
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Keyman cover held today
Additional cover needed
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How this calculator works
The calculator builds the cover from the exposure, which is the method our keyman insurance guide recommends:
- Lost profit = annual profit that depends on the person × years to rebuild it.
- Plus loans tied to the person, and recruitment and transition cost. Together these are the exposure.
- Tax gross-up = exposure ÷ (1 − tax rate) − exposure, so that the business still has the full exposure after paying tax on the claim.
- Suggested cover = exposure + tax gross-up, rounded up to the nearest ₹5 lakh. Additional cover = suggested cover − cover already held.
Estimating the profit that depends on one person
Ask what would happen to profit in the first year after they were gone. In a small, promoter-run business, most of the profit may depend on one person. In a larger firm, count only the clients, contracts or capability that would genuinely leave with them. Use profit before tax from your accounts, not turnover.
Choosing the rebuild period
Count the time to find a replacement, the time for them to become effective, and the time to win back clients. Two to three years is common. A founder-led business, or one built on a specialist skill or licence, may need longer.
Which loans to count
Count facilities where the person is the promoter, guarantor or the reason the bank lent, because these may be reviewed or recalled after a death. Leave out debt the business would comfortably service regardless.
Why the tax is added
Under the Income-tax Act, 2025, a keyman claim received by a business is taxable as business income, and the exemption that makes ordinary life insurance tax-free does not apply. The premium is generally deductible as a business expense. Grossing up the cover means the business keeps the full amount it needs after tax.
What kind of policy
Keyman cover is written as a pure term plan: a death benefit for a fixed term, with no maturity value. It gives the largest cover for the lowest premium. The key person still needs their own term insurance, because a keyman claim goes to the business, not the family.
Does a sole proprietor need this?
Usually not. A proprietorship has no separate legal identity, so the owner's own term insurance generally does the job. Keyman cover matters most where partners, shareholders, lenders or employees depend on one person. For partners, also read about buy-sell insurance.
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