Life License Qualification Program (LLQP) Practice Exam

If a Key Employee life policy is purchased on C's life at ABC Incorporated, which of these statements is true?

1. ABC is the policyowner, C is the insured, and her husband is the beneficiary

2. ABC is the policyowner, C is the insured, and ABC is the beneficiary

3. C is the policyowner and the insured, and ABC is the beneficiary

4. C is the policyowner, the insured, and the beneficiary

The correct answer is: ABC is the policyowner, C is the insured, and ABC is the beneficiary

In the context of key employee life insurance, the structure of the policy typically designates the employer as the policyowner. In this scenario, ABC Incorporated is the company purchasing the life insurance policy on C's life, which makes ABC the policyowner. C, the key employee whose life is insured, is indeed the insured party in this arrangement. The beneficiary of the policy is usually the company itself, ABC, since the purpose of having this type of insurance is to provide financial protection to the business in the event of the key employee's death. The proceeds from the policy would help the company manage the financial impact of losing a crucial employee. So, in this case, the statement that correctly reflects this relationship indicates that ABC is the policyowner, C is the insured, and ABC is also the beneficiary. This alignment of roles is fundamental to the purpose of key employee life insurance, which is to protect the business against the loss of key individuals.