Life License Qualification Program (LLQP) Practice Exam

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Question: 1 / 195

Who names the beneficiary in a Key Employee Life policy?

The key employee

The insurance company

The company purchasing the policy

In a Key Employee Life policy, the company purchasing the policy is the one that names the beneficiary. This type of insurance is designed to provide financial protection for the business in the event of a key employee's untimely death. The company has a vested interest in the key employee because that person plays a significant role in its operations or profitability. By designating itself as the beneficiary, the company ensures that it can claim the death benefit to offset potential financial losses associated with the loss of the key employee, such as lost revenue, recruitment costs, and training expenses for a replacement. This arrangement highlights the primary purpose of the policy, which is to protect the business rather than the personal interests of the employee or their family. The other options do not correctly reflect how beneficiary designations work in this context. While the key employee holds an important position, they typically do not have the authority to name themselves as a beneficiary in this arrangement. The insurance company does not play a role in naming beneficiaries; it merely provides the policy. Lastly, naming the policyholder’s estate is not appropriate here, as the intended purpose of the policy is to benefit the business directly, rather than being tied to the individual's estate.

The policyholder's estate

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