Two reasons business owners need more life insurance than most people think. First, your family depends on your income — but your business may not survive without you. Second, your business has financial obligations (debt, buy-sell agreements, key-person exposure) that need to be covered independently. This tool calculates both sides and gives you a total coverage target.
I.
About You
Basic profile for calculations
Your Age
Marital Status
Number of Dependents
Youngest Child Age
0 if no children
Spouse / Partner Income
Annual, if applicable
Existing Life Insurance
Total in force today
II.
Personal & Family Protection
What your family needs if you're gone tomorrow
Annual Personal Income (yours)
Salary, distributions, or W-2 you take from the business
Income Replacement Years
Until youngest child is 25, spouse retires, or family is self-sufficient
Mortgage Balance
Other Personal Debt
Auto loans, personal loans, HELOCs
College Funding Goal
Total for all children (4-year estimate)
Final Expenses & Estate Costs
Funeral, legal, estate settlement
Liquid Personal Assets (offset)
Cash, brokerage, 401k — assets your family could live on. NOT the business value.
Income Replacement Method
We use a present value calculation assuming a 5% discount rate. This reflects what a lump sum today would need to generate your income for the selected number of years — more accurate than a simple multiple.
III.
Business Obligations & Exposure
What the business owes if you die — and what it's worth to your partners
Business Debt (your share)
SBA loans, lines of credit, equipment — your proportional share
Personal Guarantees on Business Debt
Amounts you've personally guaranteed that could hit your estate
Buy-Sell Agreement Coverage Needed
Your ownership interest value — what partners need to buy you out
Key Person Coverage
Revenue at risk × 1–2 years: what the business loses without you
Existing Business-Owned Insurance
Existing key-person or buy-sell policies in force
Business Structure
Additional Business Risk Factors
IV.
Coverage Analysis & Results
Your estimated insurance needs, broken down
Personal / Family Coverage Needs
Business Coverage Needs
| Coverage Category | Purpose | Amount |
|---|
Methodology: Income replacement uses the present value of an annuity formula: PV = PMT × [1 − (1+r)^−n] / r, where r = 5% annual discount rate. Business obligations are added at face value. Existing assets and insurance reduce the net need. Risk factor adjustments reflect industry conventions for sole-operator and estate-liquidity premiums.
Important: This tool provides an educational estimate only. Actual insurance needs depend on insurability, estate tax exposure, ownership structure, and your specific buy-sell agreement terms. Work with a licensed advisor and attorney to determine appropriate coverage.
Important: This tool provides an educational estimate only. Actual insurance needs depend on insurability, estate tax exposure, ownership structure, and your specific buy-sell agreement terms. Work with a licensed advisor and attorney to determine appropriate coverage.
V.
Type of Insurance to Consider
Not all policies serve the same purpose
Personal / Family Protection
Term Life Insurance
Best for income replacement and mortgage coverage. Match term to your youngest child reaching 25 or your planned retirement. 20–30 year level term is the most cost-efficient solution for pure income replacement.
Business Protection
Buy-Sell: Permanent Life (Whole or UL)
Buy-sell policies often need to be permanent because you can't predict when a partner will die. Cross-purchase or entity-purchase agreements each have different policy ownership structures — your attorney and advisor must align on this.
Key Person: Term or Permanent
Key-person policies are owned by the business, with the business as beneficiary. They cover revenue loss, loan covenants, and bank requirements. Term works if the risk has a defined window; permanent if the business has long-term credit relationships.