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What is the purpose of key person insurance?



A. To provide health insurance benefits to key employees
B. To give a key employee the ability to purchase the business
C. To give retirement benefits to key employees
D. To cover decreased business earnings due to the death of a key employee

This question is part of Life & Health - Practice Exam 5
Asked by Wyatt Williams, Last updated: Sep 13, 2020

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2 Answers

M. Klose

M. Klose

M. Klose
M. Klose, Content Writer, Oakland

Answered Aug 29, 2018

The answer to this is D. This type of insurance will be very effective in covering the company’s earnings when one of the key partners or employees that are working on the business dies. For example, one of the business partner dies. This means that there will not be enough funds for the remaining partner/s to carry on with the business.

When the business has this type of insurance, this will not be a problem anymore as this will be covered by the insurance. The business should know first who among its current employees or partners can be considered to be “important” at present time.

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John Smith

John Smith

John Smith
John Smith

Answered Dec 10, 2016

To cover decreased business earnings due to the death of a key employee
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