Part of our guide: Disability Income Insurance: Solutions, Tools and Guides →
Many businesses insure their most important person against death. Far fewer insure against the more likely risk: that the person becomes too sick or injured to work for a long time.
Key takeaways
- Social Security estimates that just over 1 in 4 of today’s 20-year-olds will become disabled before reaching full retirement age.
- Key person disability commonly pays about 150% of the employee’s salary over 12 months after a 90-day wait.
- With a 12-month elimination period, lump-sum benefits of up to three times annual income, or more with justification, may be available.
Key person DI can pay about 150% of the person’s salary over a year — time to hire, train, or cover temporary help without losing profits.
Why disability is the bigger risk
A long-term disability can hurt a business as much as a death, and it’s more likely during working years. The Social Security Administration estimates just over one in four of today’s 20-year-olds will become disabled before full retirement age. See a large-scale example in our $50 million key person disability case.
How it pays
- Monthly benefit: after a typical 90-day elimination period, benefits often total about 150% of the key person’s salary over 12 months. In some cases, benefits above 150%, not tied to income, can be obtained.
- Lump sum: with a 12-month elimination period, a single payment of up to about three times annual income may be available, and larger amounts with financial justification. This suits firms that can absorb a short absence but need capital if it becomes long.
How businesses use the money
Hire temporary help if the prognosis is short, or cover recruiting, hiring, and training a replacement if the disability is permanent. It can also offset lost revenue while the business adjusts.
Building the case
We can help document the value of the key person and the likely loss to the business, which supports both the sale and financial underwriting. It’s often cross-sold with key person life insurance.
Frequently asked questions
What is key person disability insurance?
Coverage owned by and payable to a business if a critical employee or owner becomes disabled and can’t work.
How much key person disability insurance can a business buy?
Commonly about 150% of the person’s salary paid over 12 months, or lump sums of up to about three times income, with more available based on financial justification.
How is key person disability different from BOE?
Key person coverage replaces the value of a key employee; BOE reimburses the owner’s business overhead expenses while they’re disabled.
Reviewed by Tim Fuller on 2026-09-25
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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