PSI Ohio Insurance Practice Exam

In a key employee life insurance policy, who is the applicant and policyholder?

1. The employee

2. The insurance agent

3. The corporation

4. The beneficiary

The correct answer is: The corporation

In a key employee life insurance policy, the applicant and policyholder is typically the corporation or business that takes out the insurance on a key employee. This type of insurance is designed to protect the company from financial losses that may occur if a critical employee – often an executive or someone with specialized knowledge important to the business – passes away. The corporation pays the premiums for the policy and retains control over it, which means they can make decisions regarding the policy, such as cashing it in or terminating it if necessary. Although the key employee is often the insured individual, they do not hold the policy; rather, the company does, as it is the one with a vested financial interest in the employee's continued employment and contribution to the business's success. The other options represent roles that do not align with the responsibilities of the policyholder: the employee is the insured but not the policyholder, the insurance agent facilitates the sale of the policy but does not own it, and the beneficiary is typically the corporation as well but does not hold the policy. Thus, the corporation correctly represents the entity that is both the applicant and the policyholder in this context.