How much key person insurance cover does a business need?

The amount depends on the key person's role, revenue or profit contribution, replacement costs, likely disruption period, debt exposure, stakeholder requirements and existing business reserves. A business should estimate these inputs and seek professional advice before choosing a cover amount.

What is keyman insurance?

Keyman insurance is cover designed to help a business manage the financial impact of losing a key person due to death, disability or serious illness, depending on the policy. It may provide funds to support operations, replacement costs or revenue disruption during a transition period.

What are the financial benefits of keyman insurance for businesses?

Keyman insurance offers several financial benefits for businesses. Firstly, it provides a financial safety net by covering the potential loss of revenue caused by the absence of key personnel. This allows the business to continue operations smoothly without immediate financial strain. Additionally, the payout from a keyman insurance policy can be used to cover the costs of recruiting and training a replacement, ensuring operational continuity. It can also help in reassuring investors and stakeholders, maintaining their confidence in the company's stability despite the loss of a vital team member. Furthermore, for small businesses, keyman insurance can be crucial in avoiding potential bankruptcy by providing the necessary funds to navigate transitional periods. Overall, this insurance helps protect the company's financial future by minimizing disruptions and securing funds to manage unexpected changes effectively.

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Q: Is key person insurance tax deductible in Australia?

Key person insurance premiums may be deductible in Australia if the policy is taken out for a revenue purpose, such as protecting business income. If the policy protects capital, debt or ownership interests, premiums are generally less likely to be deductible. The tax treatment depends on the policy purpose, ownership, beneficiary and business circumstances, so professional tax advice is important.

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Insurance News

Why adviser capacity still matters when reviewing key person insurance

16 Sep 2026: Paige Estritori

Recent industry reporting suggests Australia’s financial advice market may be moving from contraction towards a more stable phase, after several years of adviser exits, higher compliance costs and changing professional standards. For life insurance customers, that matters because access to quality guidance can directly affect how quickly and confidently people arrange suitable cover. - read more

Life Insurance Code changes: why businesses should not wait

09 Sep 2026: Paige Estritori

Australia’s life insurance sector is again focused on conduct standards, with industry attention shifting from review recommendations to the practical work of updating the Life Insurance Code of Practice. For households, the discussion is about clearer communication, fairer claims handling and better support when people are vulnerable. - read more

Why underinsurance warnings matter for businesses with key people

02 Sep 2026: Paige Estritori

Recent industry reporting has again put Australia’s life insurance protection gap in the spotlight, with the life insurance sector warning that too many households and businesses remain exposed if illness, injury or death removes a major income source. While much of the public discussion focuses on families, the same issue applies to companies that depend heavily on a founder, director, rainmaker or technical specialist. - read more

Latest APRA life insurance signals put key person cover back on the review list

26 Aug 2026: Paige Estritori

APRA's latest quarterly life insurance performance update has added another marker to the recovery story in Australia's life insurance sector. The overall message is more settled than the volatility seen in recent years, with insurers continuing to operate in a more disciplined pricing and capital environment. For business owners, however, a steadier market should not be read as a signal to put key person insurance on the shelf and forget about it. - read more

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Life Insurance Articles

How to Estimate an Appropriate Level of Key Person Insurance Cover

Estimating key person insurance cover involves looking at the financial effect of losing a critical person, including revenue dependency, replacement costs, debt exposure, project disruption and business continuity funding needs. This guide explains practical factors Australian businesses can consider before requesting quotes or professional advice. - read more

Is Key Person Insurance Tax Deductible in Australia?

Key person insurance tax treatment in Australia depends heavily on why the policy is taken out, who owns it, who receives the payout and whether the cover protects revenue or capital. This guide explains the general principles businesses should understand before seeking tax advice. - read more

Understanding Keyman Insurance: A Practical Guide for Australian Business Owners

Keyman insurance, also known as key person insurance, is designed to help a business manage the financial impact of losing a person whose skills, leadership, relationships or knowledge are central to its operations. For Australian startups, small businesses and established companies, it can form part of a wider business continuity and risk management plan. - read more

What Key Person Insurance May and May Not Cover

Key person insurance can help protect a business if a critical person dies, becomes seriously ill or is unable to work, but cover depends on the policy type, underwriting, disclosures and exclusions. This guide explains what Australian businesses should understand before applying. - read more

Knowledgebase

Double Indemnity:
A clause or provision in a life insurance policy that doubles the payout in cases of accidental death.

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