Oklahoma Life Producer Practice Exam

Who typically pays the premiums for Key Employee Life insurance?

1. The employee

2. The employer

3. The insurance provider

4. Shared among stakeholders

The correct answer is: The employer

In the context of Key Employee Life Insurance, it is generally the employer who pays the premiums. This type of insurance is designed to protect the business against the financial loss that may occur due to the death of a key employee, who is often critical to the operations and success of the company. By paying the premiums, the employer ensures that the business has the necessary coverage to mitigate the financial impact of losing such an essential individual. This arrangement allows the employer to be the beneficiary of the policy, receiving the death benefit that can be used to cover expenses such as hiring a replacement, covering lost revenue, or managing business debts. The premiums are thus considered a business expense, enabling the employer to invest in the protection of their company while also providing a financial safety net. This structure is a standard practice in business risk management.