Calculator Inputs
Example Data Table
| Scenario | Age | Type | Coverage | Debt | Profit | Overhead months | Estimated monthly premium |
|---|---|---|---|---|---|---|---|
| Partner continuity | 38 | Term | 300,000 | 80,000 | 120,000 | 6 | ~ 35.00 |
| Key-person heavy | 45 | Term | 750,000 | 120,000 | 220,000 | 9 | ~ 155.00 |
| Buy-sell included | 50 | Universal | 1,000,000 | 150,000 | 300,000 | 12 | ~ 900.00 |
Formula Used
This tool uses two linked calculations: a coverage recommendation and a premium estimate. You can change inputs to match your business reality and see how the outputs respond.
How to Use This Calculator
- Enter your age, term length, and policy type for your planning scenario.
- Choose health, tobacco, and occupation risk to reflect pricing factors.
- Fill in business debt, net profit, key-person pay, and overhead details.
- Enable buy-sell if partners must fund an ownership purchase.
- Click Calculate to view results above the form, then download CSV or PDF.
Coverage Drivers in Small Firms
Coverage planning for a small company usually starts with obligations that survive the owner’s absence. Typical inputs include outstanding business debt, a profit buffer to keep cash flow stable, and a runway for hiring or training a replacement. This calculator converts those items into a single coverage target so you can see how each driver pushes the total upward. Model one to three years of profits.
Buy Sell Funding and Ownership Share
When partners rely on a buy sell agreement, insurance can supply liquidity at the exact moment valuation pressure is highest. Enter a business valuation and the insured owner’s share to estimate the amount needed to purchase that stake without forcing a distressed sale. Turning buy sell on adds that amount to the base need, keeping the plan aligned with equity realities. Update valuation as conditions change.
Key Person Continuity Window
Key person coverage is often sized to the time required to replace revenue or leadership capacity. Using annual key compensation and expected replacement months, the model estimates a temporary cost of disruption. Pair this with overhead months to reflect fixed expenses like rent, payroll, or subscriptions during transition. Shorter windows reduce the buffer; longer windows can dominate the need. Benchmarks range from 6 to 18 months.
Premium Sensitivity Levers
Premium estimates respond to age, term length, health category, tobacco use, occupation risk, policy type, and inflation selection. The tool produces an annual rate per $1,000 of coverage, then multiplies it by your chosen coverage. Use the profit percentage metric as a affordability check; if premium exceeds a comfortable share of net profit, adjust term, coverage, or scenario assumptions. Coverage trims reduce premiums linearly.
Scenario Comparison for Decisions
Treat the outputs as decision support rather than a quote. Compare recommended coverage to the selected amount to spot underinsurance or unnecessary cost. Export CSV to document assumptions for your broker or advisor, and use the PDF as a shareable snapshot for partners. Running three cases—conservative, expected, and stress—helps reveal the most resilient coverage range. Revisit inputs after major contracts or debt refinancing.
FAQs
What does “recommended coverage” represent?
It’s a planning total built from debt payoff, profit runway, replacement time for a key role, overhead runway, and optional buy sell funding. Use it as a baseline, then choose selected coverage that matches budget, insurer limits, and risk tolerance.
Why is selected coverage different from recommended coverage?
Recommended coverage is a computed target, while selected coverage is your chosen policy amount for estimating premiums. Some businesses intentionally choose lower coverage to manage cost, or higher coverage to add margin for valuation uncertainty and future growth.
How is the premium estimate calculated?
The calculator applies an annual rate per $1,000 based on age, term, health, tobacco, occupation risk, policy type, and inflation choice. Estimated annual premium equals coverage divided by 1,000 multiplied by that rate.
Does this replace advice from a licensed broker?
No. It helps you organize inputs and compare scenarios. Actual underwriting, carrier pricing, exclusions, and policy structure can change results materially. Use the exports to discuss assumptions and options with a qualified advisor.
What should I enter for business valuation in a buy sell case?
Use a recent formal valuation if available. Otherwise, start with a conservative estimate based on revenue, EBITDA multiples, or agreed partner pricing. Re-run the calculator whenever valuation changes, new partners join, or ownership percentages shift.
Which inputs usually move results the most?
Coverage is most sensitive to debt, profit runway years, and buy sell amount. Premium is most sensitive to age, tobacco use, health category, term length, and total selected coverage. Adjust one variable at a time to see impact clearly.
Important Notes
- Outputs are estimates for planning; underwriting and pricing vary by provider and jurisdiction.
- Consider separate policies for key-person coverage, buy-sell funding, and debt protection.
- Review beneficiaries, ownership structure, and tax treatment with qualified advisors.