Key person Disability Insurance pays the benefits to the

• A. employee
• B. the insured
• C. employer
• D. the policy owner

Answer: (C)

In key person disability insurance, the business relies on a critical employee, and the policy is designed to protect the company from the financial impact of that person’s disability. The business typically owns the policy and is named as the beneficiary. The key employee is the insured, but the purpose is to provide funds to the company, not to pay the employee directly. So the proceeds are paid to the employer to help cover lost profits, hiring and training a replacement, and other ongoing costs that keep the business operating during the disability.

That’s why the employer is the best answer. The employee (the insured) is the one protected, but the payout goes to the business to offset its economic losses. The policy owner is usually the employer as well, but ownership doesn’t change who receives the benefit—the business receives the funds to sustain operations.