Louisiana Contractors License Practice Exam

Who applies for Key Man Life Insurance?

1. The employee being insured

2. The business owns and pays for the insurance

3. Only the company owner

4. The insurance company directly

The correct answer is: The business owns and pays for the insurance

Key Man Life Insurance is a policy taken out by a business to insure the life of an essential employee, often a top executive or someone who plays a critical role in the company. The primary reason for this type of insurance is to protect the business from financial loss that could result from the untimely death of that employee. The business, as the policyholder, pays the premiums and is also the beneficiary of the policy. This setup ensures that the company receives a payout in the event of the insured individual's death, which can be used to cover costs associated with finding a replacement, pay off debts, or mitigate the financial impact on the business. This structure makes it clear that the business is not only invested in the individual but also in the overall stability and continuity of its operations. While the insured employee might have some influence on the decision to acquire the policy, they are not the ones who apply for or own the insurance. Additionally, the company owner is not the only individual involved in this process, as other stakeholders may also have input depending on the business structure. The insurance company does not directly apply for this insurance but rather provides policies to businesses that decide to secure their valuable employees.