Calculate your key person insurance amount from the business loss you want to fund. For essential bills, subtract customer payments from the bills due during recovery. Add hiring and loan costs only when the forecast excludes them. Deduct cash you agree to spend and existing insurance for the same need.

In the example below, the business needs AED 600,000 in additional cover. The example follows a UAE service company after its founder dies. The figures are assumptions for this calculation.

A business can pay every bill and still lose profit. Decide how much lost profit you also want to protect. Check for costs counted in both calculations before adding the amounts.

Estimate the Customer Payments You Would Still Receive

Start with money your remaining team could collect without the insured person. Record the amount and expected date for each payment. Review these sources separately:

  • Issued invoices: check unpaid amounts and the dates customers should pay.
  • Signed work: check what your team can finish and invoice.
  • Renewals: check which clients need the relationship with the absent person.

An invoice, a signed contract and cash received are different things. A late payment can create a cash shortage without losing the sale. List unsigned proposals separately, with the assumptions behind any expected payments.

If two people manage one account, estimate lost payments for each person separately. Then estimate customer payments and costs if both people are absent. Adding two full account losses could count the same income twice.

Before the founder dies, expected customer payments cover the bills in this example. Customer payments then fall to AED 140,000 monthly for 3 months. Payments recover to AED 170,000 monthly for the next 3 months. Use your normal forecast to identify cash shortages that existed before the event.

List the Bills and Contract Costs You Must Pay

List essential payments on their due dates throughout the recovery period. Remove costs that stop after the event. Include the following where the business still owes them:

  • Salaries for the remaining team and other employment costs.
  • Rent on actual payment dates, including large rent cheques.
  • Supplier bills, utilities and essential software or service contracts.
  • Tax payments due, including VAT or corporate tax where applicable.
  • Extra costs to finish work or pay refunds required under customer contracts.

Customer deposits may come with work the company still owes. Include the cost of that work in the forecast. Alternatively, reserve cash for it outside the forecast. Do not also reserve cash for a delivery cost already in the forecast.

If the person is an employee, check final wages and benefits. The relevant federal rule sets a 10-day deadline for these payments. Count from death or when the employer becomes aware of it. Confirm the employment rules and any amounts already funded. Illness-related pay needs a separate calculation under the applicable rules and contract.

The company in our example pays AED 200,000 monthly in routine bills. That amount excludes hiring, temporary manager fees, extra delivery support and loan settlement. The example assumes no extra final wages or benefits remain unpaid.

Budget for Hiring and the Time to Recover

Budget for hiring and the time until customer payments recover. Start with duties another team member could take over. A trained colleague may cover work while you hire.

Estimate dates for each hiring and payment stage:

  • Find a replacement for the duties your team cannot cover.
  • Confirm the joining date, including any notice period.
  • Complete handover, training and any relevant professional approvals.
  • Estimate when customers will pay for the completed work.

Use recruitment quotes and candidate availability to support these dates. Confirm the joining date and the first expected customer payment separately. For a clinic, include approvals needed before the replacement performs the work.

A temporary manager costs AED 15,000 a month for 6 months in this example. Recruitment and training cost another AED 60,000 outside routine bills. The company expects routine customer payments to recover after month 6.

Separate Loan Repayment From Your Other Bills

Read the loan agreement and any insurance attached to the loan. Confirm the amount due and the date the bank expects payment. Separate the amount for the bank from money for other bills.

Count each loan once in the calculation:

  • Continue repayments: include the instalments due during recovery.
  • Repay in full: include the settlement amount and remove later instalments.
  • Overdraft: use the amount drawn and check repayment or renewal terms.

A personal guarantee does not create a second balance for the same loan. Check money a director lent to the company separately. Record who lent it, the balance and when repayment falls due. Calculate the cost of buying out a shareholder separately. Check the legal agreement before adding that amount.

Check lender rights over existing and proposed insurance payments. An assignment can give the lender rights to some or all insurance money. Company ownership of the policy does not establish how much remains for payroll. Read the signed assignment and the benefit it covers.

The company chooses AED 400,000 to repay its loan in full. Its routine bills exclude future repayments of that settled loan. This is an example assumption, not a prediction about every bank. See our article on UAE business loans after founder death for the related document questions.

Deduct Cash and Existing Cover You Can Use

Decide how much cash the business can spend on these costs. First, allow for bills outside the forecast and the balance you want to retain. Avoid reserving cash twice for bills already included in the forecast.

Before counting cash or cover, confirm:

  • Which company holds the money and owes the bill.
  • Who can authorise payments from the relevant bank account.
  • Which event the existing insurance covers and who receives payment.
  • How much any lender assignment removes from funds for other bills.

For money in another group company, confirm the amount and transfer date. Check who can approve that transfer before counting the money. For property or stock, record the expected sale amount and payment date. Support that figure with sale records, offers or an agreed payment schedule. Do not count overdue invoices again after including them as expected customer payments.

A family policy does not automatically supply money for company bills. An insurer may still request its details when assessing total cover. Review company and family funding as separate needs.

The company can spend AED 100,000 after other commitments and its chosen minimum balance. It also has AED 150,000 of existing death cover that pays the company. No lender has rights over that benefit in this example. Both amounts will fund bills and recovery.

Calculate the Additional Keyman Insurance Cover

The company needs AED 850,000 before deducting cash and existing insurance. Its cash supplies AED 100,000 and existing cover supplies AED 150,000. The additional amount to apply for is AED 600,000.

Extra delivery support costs AED 30,000 outside the routine bills. Each extra cost below appears once in the calculation. The total excludes the cost of buying out a shareholder.

Item Calculation Amount
Routine shortage, months 1–3 (200,000 − 140,000) × 3 AED 180,000
Routine shortage, months 4–6 (200,000 − 170,000) × 3 AED 90,000
Temporary manager 15,000 × 6 AED 90,000
Recruitment and training Assumed budget AED 60,000
Extra delivery support Outside routine bills AED 30,000
Loan repayment in full No later instalments counted AED 400,000
Need before cash and insurance AED 850,000
Cash available for spending Deduct once − AED 100,000
Existing death benefit for the company Deduct once − AED 150,000
Additional cover to apply for AED 600,000

After cash, the total insurance funding need is AED 750,000. Existing cover meets AED 150,000 of that amount. The additional cover is AED 200,000 for recovery and AED 400,000 for the loan.

Two professionals review a cash flow forecast, invoices and a calculator for keyman insurance planning

If You Spend Less Company Cash

Suppose the company spends AED 60,000 and retains another AED 40,000. With other assumptions unchanged, additional cover rises to AED 640,000. The chosen minimum balance changes the cash deduction, not the business costs.

If Recovery Takes Another 3 Months

Customer payments remaining at AED 170,000 leave a monthly shortage of AED 30,000. A temporary manager adds AED 15,000 a month while the business recovers. Another 3 months therefore costs AED 135,000, increasing additional cover to AED 735,000.

Fund Bills Due Before Insurance Pays

Assume the full hiring budget falls due in month 1. The bill shortage, temporary manager fees and hiring then total AED 135,000. Available cash supplies AED 100,000, leaving AED 35,000 still to fund. That partial test excludes the loan settlement and extra delivery costs. Their due dates could increase the early cash need.

Start with cash available after commitments outside this forecast. Carry the balance forward after each customer receipt and business payment. Find how far the lowest balance falls below your chosen minimum. Assess existing insurance and its payment date separately. A larger policy amount alone does not supply cash before a claim pays.

Compare Different Ways to Estimate Keyman Insurance Cover

A cash-flow calculation estimates the funding needed for the expenses and obligations included in the recovery forecast. Profit and salary methods provide other ways to assess the financial impact of losing a key person.

These methods can produce different answers because they measure different things.

Method What it helps assess What to check
Replacement and recovery costs Funding needed while recruiting, training and restoring operations Recovery time, income retained and additional costs
Attributable profit The profit dependent on the particular person Their contribution, rather than automatically using the company’s entire profit
Salary multiple An initial cross-check of the proposed amount Whether salary fairly reflects the person’s importance
Debt funding Borrowing the business needs to repay or service Loan terms, existing insurance and lender rights

Why Salary Alone May Not Be Enough

A founder may take a modest salary while generating much of the company’s profit. An employee may own no shares but hold essential technical knowledge or customer relationships.

Salary and shareholding percentage do not automatically show how much profit depends on that person.

An Illustrative Profit-Based Calculation

Suppose a company has average annual net profit of AED 800,000. For this illustration, it estimates that 60% depends on the founder.

Step Calculation Amount
Average annual company net profit Illustrative assumption AED 800,000
Annual net profit attributable to the founder AED 800,000 × 60% AED 480,000
Illustrative five-times profit calculation AED 480,000 × 5 AED 2,400,000

The 60% contribution and five-times multiple are assumptions for this example. They are not industry averages or guaranteed insurer limits. A real assessment needs evidence supporting the person’s contribution and the proposed amount.

The insurer determines the financial information required and the cover it will offer.

Why This Differs From the Earlier Example

The earlier example produces AED 600,000 of additional cover after allowing for specified recovery costs, loan repayment, available cash and existing insurance.

The profit-based example uses a different hypothetical business and assesses its attributable profit exposure. It does not replace the earlier calculation.

Do not add results from different methods where they measure the same loss. Assess separate obligations individually and remove any overlap. Do not automatically select the highest figure without understanding what each calculation includes.

The appropriate profit-averaging period and multiples depend on the insurer, benefit and business circumstances.

How the Assessment Changes for Clinics and Distributors

The calculation should reflect how the business earns money and how it could operate without the key person.

Clinic manager and medical device distributor review a continuity plan in a Dubai clinic office

Clinics and Doctor-Led Businesses

A clinic should assess how much income and profit depend on its lead doctor or specialist, and how much activity the remaining clinical team could retain.

The recovery forecast should consider:

  • Salaries, rent, equipment finance and other expenses that continue.
  • The availability and cost of suitable temporary clinical cover.
  • Recruitment, joining time and applicable credentialing or approvals.
  • The time needed for appointment activity and customer receipts to recover.

A doctor’s salary alone may not reflect their financial contribution to the clinic. Equipment debt and any shareholder purchase obligation should be assessed separately, without counting the same cost twice.

Pharma and Medical-Device Distributors

A distributor should assess the income and profit dependent on the founder or another key person’s customer, supplier and principal relationships.

The recovery forecast should consider:

  • Customer payments the remaining team can still collect.
  • Supplier invoices, payroll, warehouse and logistics commitments.
  • The cost of maintaining customer and principal relationships during the transition.
  • Recruitment and training needed to replace commercial or technical responsibilities.
  • Borrowing and credit facilities requiring a separate review of their terms.

Do not assume every sale disappears when one person is lost. Equally, do not assume customer and supplier relationships will continue unchanged. Record the assumptions and test a slower recovery.

These are assessment considerations, not industry-average costs or recovery periods. Use the business’s accounts, contracts and documented replacement estimates.

Check Who Receives Each Policy Payment

Check what each benefit covers, its amount and who receives payment. The same person or company may not receive every benefit. Read the payment instructions for death, illness and disability benefits separately.

Check which illnesses and disability conditions the policy covers. A long absence alone does not prove the policy conditions apply. Resignation or retirement does not create a death or critical illness claim. Some benefits exclude events during a waiting period after cover starts. The waiting period does not set the claim payment date.

Some policy terms reduce life cover after an illness or disability payment. A joint policy can also end after the first insured death. Read your issued contract before counting separate or later payments. Use the cover remaining after any earlier claim when you recalculate.

Review the Amount and Years of Cover

Review the amount after new borrowing, changed customer income, a replacement or a claim. Review the years of cover at the same time. Use loan dates and project dates to discuss how long cover should last. Include any agreed handover date when reviewing that period.

Recovery months and policy years measure different periods. A 6-month recovery can follow an event several years from now. Check when life cover and each illness or disability benefit end.

Confirm contract options before requesting an increase or reduction. A changed business need does not give an automatic right to alter cover. Check when an accepted change would start and what evidence the insurer requires. Recalculate remaining cover after a claim instead of using the old schedule.

Review Your Figures With Dr Rafiya Mushtaq

Bring accounts, a cash forecast, loan documents and existing policy schedules. Include hiring costs, expected recovery time and cash you agree to spend. Review who receives each amount, its purpose and its payment date.

Record the amount needed, cover offered and money still to fund separately. A premium budget does not change the underlying business loss. If cover falls short, document extra cash or agreed borrowing for the remaining bills.

Dr Rafiya Mushtaq reviews business funding needs at Clarity Financial Consultancy. Bring the figures above to discuss bills, debt and existing cover. Discuss your keyman insurance amount using those records.

Book a First 72 Hours Liquidity Review

These examples provide general information, not an individual cover recommendation. Insurers assess applications and claims under the relevant contract. Obtain advice for your business and any assignment.