How often should key person insurance coverage be reviewed?

Key person insurance coverage should be reviewed regularly to ensure it remains adequate and appropriate for your business needs. At minimum, conduct a comprehensive annual review of all key person policies, assessing whether coverage amounts still reflect each key person's current value to the business, whether all current key persons are covered, and whether premiums remain competitive. Additionally, trigger event reviews should occur whenever significant business changes happen: when the business experiences substantial revenue growth or decline (impacting the key person's contribution value), when key persons take on expanded responsibilities or change roles, when new potential key persons join the business, when key persons leave or retire, when business loans are taken out or repaid (affecting capital protection needs), when ownership structures change, or when business succession plans are updated. Financial reviews should assess whether the calculation method used (salary multiple, contribution to earnings, etc.) still produces appropriate coverage amounts given current business conditions. Tax structure reviews ensure the revenue/capital purpose split still aligns with business needs and maximises tax efficiency. Underwriting reviews may identify opportunities to reduce premiums if key persons have improved health or quit smoking. As the business matures and becomes less dependent on individual key persons, coverage amounts might be reduced. Conversely, rapidly growing businesses often need to increase coverage. Professional insurance advisers typically recommend documented annual reviews with formal reassessment every 3-5 years or whenever major business changes occur.