What is key person (keyman) insurance?
Key person insurance, also called keyman insurance, is life insurance a business buys on an owner, director or employee whose death or permanent disability would cost it money. The business pays the premium and receives the payout, to cover lost profit, recruit a replacement, repay loans or buy out the person's share.
Key person cover from a Kenyan insurer
CIC's Keyman policy pays the business if a critical employee or director dies or is totally and permanently disabled. The money can replace lost income, support dependants or buy out the deceased's share, and CIC settles five days after all documents arrive.
Source: CIC Life: Keyman Policy brochure
Who counts as a key person?
- A founder or managing director who wins most of the business
- A partner in a law, accounting, engineering or medical practice
- A director who personally guarantees the company's loans
- A top salesperson or the one specialist who holds key licences or client relationships
- Any shareholder whose death would leave the others needing to buy out their family
How to set the sum assured
- Profit method: the profit the person brings in, times the years it would take to recover
- Salary method: a multiple of their pay and benefits
- Replacement cost: recruiting, training and the months of lost output
- Loan method: the business loans they personally guarantee
- Share value: for a buy-out, their stake at the value set in the shareholders' agreement
Insurers expect the sum to match a real financial loss. We help you document the basis.
What the payout can fund
Lost profit
Keeps the business trading while sales recover.
A replacement
Recruitment, training and handover costs.
Loans
Repays bank loans the person guaranteed, so the bank does not call them in.
A share buy-out
Lets the surviving owners buy the stake from the family at an agreed price.
Key person, shareholder protection or loan cover?
| Key person cover | Shareholder protection | Business loan cover | |
|---|---|---|---|
| Who is insured | A key owner or employee | Each shareholder | The borrower or guarantor |
| Who receives the money | The business | The surviving shareholders | The lender |
| What it is for | Lost profit, replacement, loans | Buying the deceased's shares | Clearing the loan |
| Paperwork needed | A board resolution | A shareholders' agreement with a buy-out clause | The loan agreement |
- Key person cover
- A key owner or employee
- Shareholder protection
- Each shareholder
- Business loan cover
- The borrower or guarantor
- Key person cover
- The business
- Shareholder protection
- The surviving shareholders
- Business loan cover
- The lender
- Key person cover
- Lost profit, replacement, loans
- Shareholder protection
- Buying the deceased's shares
- Business loan cover
- Clearing the loan
- Key person cover
- A board resolution
- Shareholder protection
- A shareholders' agreement with a buy-out clause
- Business loan cover
- The loan agreement
Shareholder protection (buy-sell cover)
Kenya's Companies Act 2015 requires articles of association but not a shareholders' agreement; without one there may be no buy-out or valuation clause when a shareholder dies.
Source: Nation.Africa: 'Why gentleman's agreement ruins companies' (advocates' column)
A buy-sell arrangement needs three things: a shareholders' agreement with a death trigger and a valuation method, a life policy on each shareholder matching their stake, and a clear route for the money, such as cross-ownership or a trust. Your advocate drafts the agreement; we arrange the cover.
Tax: take advice first
- No published KRA ruling covers key person premiums or payouts
- Deductibility turns on the Income Tax Act test that an expense is wholly and exclusively incurred in producing income
- How the premium is treated usually decides how the payout is taxed
- Ask your tax adviser before you set up the policy
Frequently asked questions
What is keyman insurance?
Keyman (key person) insurance is a life policy a business takes out on someone whose death or disability would hurt its profits: a founder, director, top salesperson or specialist. The business pays the premium and receives the payout.
What does life insurance not cover?
Each policy lists its own exclusions. The usual ones on Kenyan plans are:
- Suicide in the first two years (some plans list it with no time limit)
- Death from a health condition you did not disclose when you applied
- Death while committing a crime, or from deliberate drug or alcohol abuse
- War, terrorism or riot when you take an active part
- Hazardous sports and private flying, unless the insurer agreed to cover them
- Natural-cause death during a waiting period, where the plan has one
- Any death after the policy has lapsed for unpaid premiums
Read the exclusions page of your policy, and tell us about any risky job or hobby before you apply.
How much key person cover should a business buy?
Common methods are a multiple of the person's salary, their share of profit for a few years, the cost of recruiting and training a replacement, and any loans they personally guarantee. We help you document the basis so the insurer accepts it.
Who pays and who receives the money?
The business proposes the cover, pays the premium and is the beneficiary. The key person must agree and answer the health questions, because it is their life that is insured.
Are key person premiums tax-deductible in Kenya?
There is no published KRA ruling on key person cover. Whether a premium is deductible depends on the Income Tax Act's test that expenses are incurred wholly and exclusively in producing income, and that also affects how the payout is treated. Take advice from your tax adviser before you set it up.
What is shareholder protection?
Life cover that gives the surviving owners the money to buy a deceased shareholder's stake from the family, at a price agreed in advance. It works with a shareholders' agreement that has a buy-out and valuation clause.
How much does key person insurance cost?
Insurers do not publish key person rates: the premium depends on the person's age, health, role and the sum assured. We get quotes from the insurers that offer it.
Protect the people your business runs on
Tell us who you want to cover and roughly how much. We compare the insurers that offer key person cover.
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Sources (4)
Facts and published prices checked 28 Oct 2026; last reviewed October 2026 by Naveah Capital. Prices shown are insurers' published starting prices and planning estimates in Kenya shillings; they are not a quote. Naveah Capital Insurance Agency is an IRA-licensed insurance agency in Nairobi; this page is general information, and your policy wording decides your cover.
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