How much key person insurance costs has no fixed answer: each premium is set for the named person, the sum the business insures and the term, so the price comes from a quote rather than a rate card. The business, not the key person, usually pays it, and key man insurance (the older name for the same cover) is priced the same way.

Want a real figure for your own company? It takes a few minutes to leave the company's details in the quick form on this page. Whoever calls back is an FCA-authorised broker: they ask about the key person, the cover and the term, then price it with the insurers they use, without charge.

What decides the monthly cost of key person insurance?

Start with the person being covered. Aviva's Business Protection Term Assurance Cover Details (EDCO1589 0126) say: "When you take out cover, your premium is based on your health and lifestyle at the time." The same document shows what that can mean in practice. A premium can be reduced later if the person was smoking or using nicotine products when the cover started but has stopped for over 12 months, and it lists occupation and certain hobbies as things that can have increased the premium in the first place.

Legal & General gives a similar list for its ordinary life cover, in its guide to the average cost of life insurance (page dated 29 July 2026): monthly payments are "based on a range of factors", including "age, smoker status, weight (Body Mass Index), occupation and family medical history". That page is about personal policies, not business ones, so treat it as an indication of what insurers ask about, not a rate card for key person cover.

Generally, an older key person, a smoker, or someone with a health condition will usually mean a higher premium than a younger, healthy non-smoker would see for the same policy. A reader whose key person has a medical history may find how insurers treat medical conditions useful. A larger sum insured or a longer term will usually cost more than a smaller or shorter one. How big any of these effects is can only be seen on a quote for the named person.

How do the type of cover and the options change the price?

Adding critical illness is the clearest cost choice. Legal & General's Key Person Protection page says critical illness is covered only "if Critical Illness Cover is chosen at the outset for an extra cost". Death-only cover is the baseline; what extra cost means in pounds depends on the person and the sum, so it is for a quote to show. The two kinds of cover are explained in our life and critical illness guide.

The shape of the cover matters too. Aviva's Business Life Insurance Options summary (AL15005 0926) lets a business choose level cover, where the payout stays the same, or decreasing cover, where "it will decrease each month, broadly in line with a repayment loan", over a term of anywhere from one to 50 years. Cover that tracks a loan that is being paid off, rather than a flat sum for the full term, is one reason two key person quotes for the same person can differ. For its personal cover, Legal & General says decreasing life insurance "usually costs less" than level life insurance; whether that holds for a particular business policy is for the quote.

Whether the premium can move after the start is another thing to ask. On the same summary's terms, "If you choose life cover, your premiums are guaranteed", while with life and critical illness cover the premiums "can be either guaranteed or reviewable", and reviewable ones are reviewed every five years with a likely change. Where the sum assured increases, the insurer's Cover Details say the premium is reviewed each year and rises by a higher percentage than the sum assured. These are Aviva's terms, not every insurer's.

Waiver of premium, which keeps the policy going if the person cannot work through illness or injury, is an optional add-on there, and its price is covered in how much waiver of premium costs.

If the business is weighing level against decreasing cover, or one person against two, the broker who rings after you send the enquiry can lay the options side by side from the insurers it works with, without charge.

Who pays the premium: the business or the key person?

Usually the business. Legal & General's Key Person Protection page says "The policy is owned and paid for by the employer, so any pay-out is payable to the employer", and its technical guide for advisers says that where a company owns the policy it "would usually pay the premiums". That is the answer to the common question of who pays in a key man insurance policy: the owner of the cover, which is normally the company.

It is not the only arrangement Aviva's documents allow. When the cover is on someone else's life, the owner "may choose whether they or the person covered pays the premiums". Who owns the policy and receives the money is set out in who owns key person insurance.

Whether the company can treat the premium as a business expense is a separate question from who pays it. HMRC's Business Income Manual (page dated 1 April 2016) makes it conditional: the only purpose of the policy is the trade purpose of meeting a loss of trading income if the key person's services are lost, not a capital loss; and a life policy is term insurance with no other benefits. Where both are met, "the premiums will be deductible, and sums received under such a policy will be income of the employer's trade". Where they are not, the manual's general rule is that the premiums cannot be deducted, so the after-tax cost of the same premium can differ between two companies. That is HMRC's general position, not tax advice, and tax rules can change; why a loan-related policy is treated differently is in whether key person insurance is tax deductible, and the company's accountant can confirm how it applies.

Is key person insurance expensive, and what is the average cost?

Key person rates are set person by person, and any average would mix a young non-smoker insured for a modest sum with an older director insured for a large one, so it would say little about any one company. The cost per month or per year comes from a quote built on the details above; a key man insurance premium calculator that does not know the person's health, smoking status, the sum and the term can only guess.

What can be said is how the cost compares with other cover in kind. Key person insurance is business life cover, and many of the same factors move its premium as move a personal policy. For how those personal premiums work, see what life insurance costs per month; for the cost of related cover, see how much income protection costs and critical illness insurance cost.

Whether the figure feels expensive is easier to judge against the sum at stake than in isolation, and, where HMRC's conditions above are met, against the premium after tax relief; and working out that sum is the job of how to calculate key person insurance. Ask the broker on the call-back to talk you through how to read a quote against it; that conversation is free.

If you are comparing this cover with other ways of protecting a company, key person vs relevant life and key person insurance and shareholder protection explain how the products differ, and the rest of the range is in our business cover guides.

What to have ready to get a quote for your business

The details above are the ones a quote will turn on, so having them to hand makes the call-back quicker:

  • who the key person is, their age, whether they smoke, and any health conditions;
  • the amount of cover the business wants and the length of term, or the loan it is tied to;
  • whether to add critical illness cover, and whether the premium should be guaranteed or reviewable;
  • whether the cover is for one person or for several.

If you are not yet sure what the sum should be, what key person insurance is for sets out how insurers' own guidance describes the options. Once those details are to hand, submit the enquiry and a broker who is FCA-authorised will phone to go through them and give quotes at no cost.

Frequently asked questions

How much does key man insurance cost per month?

It depends on the person's age, health and smoking status, the sum and the term, so there is no standard monthly figure. Two businesses insuring the same sum can pay quite different amounts if the people covered differ.

Is key person insurance paid monthly or yearly?

Aviva's Cover Details for its business term cover describe the premium being paid every month for the term of the cover (unless a waiver of premium claim is accepted), so the cost per year is simply a year's worth of those monthly payments. Whether a particular insurer will take an annual payment instead is a quick question for the broker on the free call-back.

Does key person insurance cost more with critical illness cover?

Legal & General's page says critical illness cover on its Key Person Protection is chosen at the outset "for an extra cost". How much more depends on the person and the sum.

Can the premium go up during the policy?

With Aviva's business life cover the premiums are guaranteed on life cover, while life and critical illness can be guaranteed or reviewable. Other insurers' terms may differ.

Who pays for a key person policy?

Normally the business that owns it, as Legal & General's page says. Aviva's documents also allow the owner to choose that the person covered pays.

Are key person insurance premiums tax deductible?

HMRC's manual says they are deductible only where the policy's sole purpose is to meet a loss of trading income from losing the key person, and a life policy is term insurance with no other benefits; as a general rule, otherwise they are not. The company's accountant can confirm its own position; more is in whether key person insurance is tax deductible.

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