Question 89

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

A Key Person Disability Income Policy is designed to provide financial support to a business when a key employee becomes disabled and is unable to work. This type of policy ensures that the employer receives benefits to offset the financial impact caused by the absence of that key individual.

A) spouse.

This option is incorrect because a Key Person Disability Income Policy does not provide benefits directly to the spouse of the disabled employee. The policy is intended to protect the financial interests of the employer rather than the personal financial obligations of family members.

B) dependent.

This option is also incorrect. Similar to the spouse, dependents do not receive benefits from a Key Person Disability Income Policy. The focus of this policy is to sustain the employer's financial stability rather than to provide support to the dependents of the key employee.

C) employee.

While the employee is the one who becomes disabled, this option is incorrect as the policy does not pay benefits directly to the employee. Instead, the benefits are directed to the employer to help manage the financial repercussions of losing a key contributor to the business.

D) employer.

This option is correct as the Key Person Disability Income Policy pays benefits to the employer. The purpose of the policy is to ensure that the business can continue to operate and manage expenses in the event that a key employee is unable to perform their duties due to disability.

Conclusion

The Key Person Disability Income Policy is specifically structured to provide financial compensation to the employer, making option D the only correct choice. All other options, including spouse, dependent, and employee, do not align with the primary purpose of the policy, which is to safeguard the business's financial interests in the face of the loss of a key employee.