Life Insurance FundamentalsQuestion 137 of 716

Acme Manufacturing buys a life policy on its CEO. Acme pays the premiums, is the policyowner, and is the beneficiary. What kind of arrangement is this?

a.Key person insurance
b.Group term life plan
c.Buy-sell agreement
d.Split-dollar arrangement

Explanation

Key person (or 'key employee') insurance is owned by the business on the life of an employee whose death would harm the firm. The business is both owner and beneficiary; proceeds offset lost profits and the cost of recruiting a replacement.

Law Reference: Standard insurance principles

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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)
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