In most Singapore SMEs, the business depends heavily on one or two key individuals — the founder, a top salesperson, a lead engineer, or a critical relationship manager. If that person is suddenly incapacitated or passes away, the financial impact can be devastating. Key person insurance exists to protect against exactly this risk.
What Is Key Person Insurance?
Key person insurance (also called key man insurance) is a life and/or disability insurance policy taken out by a company on its most critical employees. The company pays the premiums, and the company is the beneficiary. If the insured person dies or becomes permanently disabled, the payout goes to the business — not the individual's family.
Who Qualifies as a “Key Person”?
Founders & Directors: The visionaries whose departure would shake investor and client confidence
Top Revenue Generators: Salespeople or relationship managers responsible for a significant portion of revenue
Technical Experts: Engineers, developers, or specialists with irreplaceable knowledge
Key Relationship Holders: People whose personal relationships drive major client accounts
The Real Cost of Losing a Key Person
When a key person leaves unexpectedly, the costs compound rapidly:
6-18 months
To find and onboard a replacement
2-3x salary
Total replacement cost
20-40%
Revenue at risk if top salesperson
Immediate
Impact on team morale and clients
How Much Coverage Do You Need?
There are three common methods to calculate key person coverage:
Multiple of Salary
5-10x the key person's annual compensation. Simple but may not reflect true business impact.
Revenue Contribution
2-3 years of the revenue directly attributable to the key person. Best for sales-driven roles.
Replacement Cost
Total cost to recruit, onboard, and train a replacement plus revenue loss during the transition period.
What Does Key Person Insurance Cost?
Key person insurance is surprisingly affordable for the protection it provides. For a healthy 40-year-old, SGD 1 million in term coverage typically costs SGD 1,500-3,000 per year — a fraction of the potential financial impact. Premiums are generally tax-deductible as a business expense (consult your tax advisor for specifics).
Key Person Insurance vs Buy-Sell Agreements
These are complementary, not interchangeable. Key person insurance protects the business from financial loss. Buy-sell agreements (funded by insurance) ensure smooth ownership transfer between partners if one exits. Most SMEs with multiple partners need both.
How to Get Started
Identify your key people — Who would the business struggle without?
Quantify the risk — What's the financial impact of losing each person?
Get quotes — Compare across multiple insurers for the best rates
Review annually — As your business grows, your coverage needs change
Protect Your Business Today
Get a free key person risk assessment. We'll help you identify who to insure and how much coverage you need.
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