Key Person insurance

Key Person Income can be used to help small businesses of up to 20 employees protect against the loss of income, if its owners or key income generating staff are unable to work due to sickness or injury.

The loss of a key person, either temporarily or permanently, can have a major impact on a small business, potentially resulting in it failing. Despite this, a significant number of small businesses still have no cover in place.

Until now, the lump sum insurance solutions available have left gaps in the way a small business can be covered. BT's new Key Person Income is income protection for small businesses, and closes this insurance gap.

This provides a great opportunity for you to chat to your clients about their Key Person protection strategy.

Learn more below:

There are certain criteria that must be met in order to have Key Person Income. Download the fact sheet for more information. A key person can either be a business owner or an employee of the business, and can cover up to three key people within that business, in the event they become disabled due to sickness or injury, where their absence would result in a significant loss of revenue to the business.  Other examples of key people include:

  • A business owner or employee who is critical to the business by directly contributing to the business revenue.

  • An employee with a particular skill or technical expertise, e.g. working director, managing director, CEO, partner, senior sales manager.

Sam Kitchen, Senior Adviser, William Buck Chartered Accountants, talks about how Key Person Income will help grow his business.

Product benefits

  • Total Disability Benefit: If the insured person is totally disabled, a monthly benefit will be paid, after the end of the waiting period.

  • Elective Surgery Benefit: Pays a monthly benefit if the insured person is totally disabled or partially disabled because of elective surgery such as a transplant (where they are the donor) or cosmetic surgery.

  • Recurrent Disability Benefit: Allows the waiting period to be waived if the insured person becomes disabled again within a certain period of time after we have paid a Total Disability or Partial Disability benefit due to the same sickness or injury for which the benefit was paid.

  • Death Benefit: Pays a benefit if the insured person dies while they are entitled to the payment of a Total Disability or Partial Disability benefit.

  • Personal & Business: BT Protection Plans offer a solution to suit both personal and business clients' needs 

Key features for your clients

  • Peace of mind: Key Person Income helps provide your small business clients with peace of mind that they can continue to keep their business running during the absence of a key person.

  • Increased coverage: Key Person Income can be used with Income Protection (IP) to provide broader income coverage for small business owners and employees.

  • Their payment, their choice: Clients choose how to spend their benefit e.g. to hire a temporary employee to train other employees.

  • Level of cover: Key Person Income can be used to cover up to 3 key people within the business.

  • Amount of cover available: Business owners can insure the revenue they produce while employees can be insured for up to 150% of their salary.

  • Tailor the benefit: Business owners can choose from a 30 or 90 day waiting period, with a 1 year benefit period and a monthly benefit of up to $60,000.

  • CPI increases;

  • Guaranteed renewable provided premiums are paid when due;

  • Guaranteed upgrades automatically, provided the upgrade does not result in an increase in premium.  

  • Loadings, exclusions or special conditions will continue to apply;

  • Loyalty benefit after the policy has been held for 3 years;

  • Multi-Policy discount on the premium applicable to the insured person;

  • Premium Holiday if a policy has been in force and premiums paid for 6 months, we will allow the insured person to suspend their policy for up to 12 months in certain circumstances of financial hardship;

  • Wrap discount; and

  • Worldwide cover - 24 hours a day.

Scott Moffitt, BT National Manager Life Insurance Products, discussing how BT Key Person Income meets a gap in the market

Key Person Income may generally be owned by a trust or business entity. Key Person Income cannot be held within superannuation.

Generally, where the purpose of the insurance is to protect the revenue of the business, such as by replacing lost sales, the premiums can be tax deductible and any payments assessed as income. Learn more in the BT Protection Strategies Business Owners guide.

Example Situations

The amount of the Total Disability Benefit is the lesser of:

  • The insured monthly benefit; and
  • The pre-disability monthly business income.

The calculation of pre-disability monthly business income is applied differently depending on whether the insured person is a key person business owner or key person employee.

Business owners:

If the insured person is a key person business owner, the pre-disability monthly business income is calculated based on:

A x B = C

A = a percentage, being the lesser of:

  • the insured person’s ownership of the key person business at the date of disability;
  • the average percentage of gross profit attributed to the insured person in the 12 months immediately preceding the commencement of total disability or partial disability; and
  • 50%.

B = the average monthly gross profit of the key person business for the 12 months immediately preceding the commencement of total disability or partial disability.

C = pre-disability monthly business income.


Sam and Brendan own equal shares in a cosmetic dental surgery, S and B Dental. The gross profit for S and B Dental is $1.5 million per annum and Sam and Brendan are each responsible for generating 35% of the gross profit ($525,000 each).

Therefore, (35% x $1.5 million) divided by 12, equals the pre-disability monthly benefit of $43,750.


If the insured person is a key person employee, the pre-disability monthly business income is calculated based on the insured person’s average monthly earnings in the 12 months immediately preceding the commencement of total disability or partial disability multiplied by key person factor*.


Anna is employed as a full time dentist by S and B Dental. She has developed relationships with many of the patients, and is responsible for generating 30% of the gross profit ($37,500 per month). Anna’s gross monthly earnings** is $16,250.

Therefore, 150% x $16,250 equals a maximum monthly benefit of $24,375.

* This is the percentage of monthly earnings we agree to replace at the time of claim, and is shown in the policy schedule.

** Monthly earnings is the normal monthly value of the remuneration package paid to the person including salary, superannuation contributions, fees, commissions, regular overtime and bonus payments and packaged fringe benefits.  Monthly earnings are calculated as gross.

Strategy webinar: how to use Key Person Income with your clients

Katherine Ashby, BT Senior Product Technical Manager for Life Insurance, presenting a webinar about the strategy behind Key Person Income and how to use it with your clients.

Case studies

A BT Key Person Income  policy allowed Grey Shirts Accounting to continue paying their bills and business expenses when one of the partners was absent for 3 months due to an illness. 

Chris and John, NSW. Hypothetical case study only

Reinforce Engineering  found that their insurance cover didn't provide the assistance they needed when one of their key people had to take a significant period of time off work due to an accident.

Tim and Ross, WA. Hypothetical case study only

Green Fences Ltd found  that their key man insurance only partially covered their General Manager's illness so were left short which had a massive impact on the business.

Brad, SA.

Additional BT Protection Plans Enhancements

Return to work

BT continues to support your clients by removing the complexity around the claims process. We believe that allowing your clients to remain active and in touch with their work and peers is important, both mentally and physically. BT allows your clients to return to work at full capacity during the waiting period for a specified number of days without changing the waiting period requirements.

Advanced partial payment

BT continues to put the customer first by enhancing our existing claims process. Introducing another market first initiative 'Early first Claim'. 'Early first Claim' ensures that financial support is provided to your clients faster at a time when they most need it.

Future insurability

BT's future insurability benefit is one of the best in market and we're improving it to align with your annual review process. Future Insurability for IP now allows clients under age 55 to increase their monthly benefit yearly, as their salary increases, rather than every 3 years.

Child care benefit

BT has listened to you and your clients and continues to support them whilst they're on claim. BT now offers an extra benefit to help with the additional child care cost while they're totally disabled.

Business Overheads

For business owners their business is their livelihood, so it makes sense they'd want to protect it. Business Overheads helps clients to keep their business running if they are unable to work due to sickness or injury. Business Overheads pays a monthly benefit to the business owner, which they can use to cover day-to-day business expenses like rent, rates, gas & electricity bills. Business Overheads allows the business owner to focus on their recovery, knowing that the day-to-day business expenses are covered.

Homemakers cover

Even though full time homemakers don't earn an income, we recognise that it would cost a substantial amount of money to pay someone else to do their job when they can't. That's why we introduced Homemakers cover. Homemakers cover provides a monthly benefit for homemakers if they become temporarily disabled, due to sickness or injury, and are unable to perform their normal household duties. Homemakers cover is an additional benefit that can be added to any BT Protection Plans policy. The maximum benefit for Homemakers cover is $5,000 per month for 2 years.

BT Reserve

High net worth clients have unique needs. That's why BT introduced BT Reserve. BT Reserve has been specifically designed for clients with high incomes and significant debt, whom need higher levels of protection. BT Reserve offers both higher levels of cover and more services than our standard BT Protection Plans. BT Reserve provides your clients with a trusted solution for their needs that doesn't require a complex strategy. It gives you more flexibility when it comes to crafting a complete insurance solution tailored to your High Net Worth clients' needs.

Speak to your Business Development Manager or call BT Adviser Services