Question 89

A Key Person Disability Income Policy pays benefits to the employer.

This type of policy is designed to provide financial support to a business when a key employee becomes disabled, thereby ensuring the employer can manage the financial impact of losing that individual temporarily.

A) spouse.

A spouse is not the beneficiary of a Key Person Disability Income Policy. This policy specifically protects the financial interests of the business rather than personal relationships, making this option incorrect.

B) dependent.

Similar to the spouse, a dependent is not the intended beneficiary of a Key Person Disability Income Policy. The focus of this policy is on the employer's financial stability, not on individual dependents, which renders this choice incorrect.

C) employee.

While the employee is the one who may be receiving the disability benefits, the policy itself does not pay benefits directly to the employee. Instead, it supports the employer to mitigate losses associated with the employee's absence, making this option incorrect.

D) employer.

The Key Person Disability Income Policy provides benefits to the employer, ensuring that the business can sustain itself in the event that a key employee becomes disabled. This is the primary function of the policy and is why this option is correct.

Conclusion

The Key Person Disability Income Policy is fundamentally about protecting the employer's financial interests in the face of a key employee's disability. Options A, B, and C do not align with the purpose of the policy, which is to provide benefits directly to the employer, thus affirming option D as the correct choice.