Rhode Island Life Insurance Practice Exam

Who typically pays the premium for a Key Employee Life insurance policy?

1. The insured employee

2. The employer

3. The beneficiaries

4. The insurance company

The correct answer is: The employer

In the context of a Key Employee Life insurance policy, the employer is typically responsible for paying the premiums. A Key Employee policy is designed to protect a business from the financial impact that could arise from the loss of a key individual who is critical to its operations, such as an executive or a vital team member. By paying the premiums, the employer ensures that the policy is in force, providing financial benefits that can be used to cover potential losses or to find and train a replacement in the event of the key employee's untimely death. This arrangement allows businesses to mitigate risk and safeguard their financial health. The other parties mentioned, such as the insured employee or beneficiaries, do not typically bear the responsibility of paying premiums for this type of insurance. The insurance company, on the other hand, does not pay premiums; instead, it provides the insurance coverage in exchange for the premiums collected.