Tennessee Life Producer Practice Exam

In a Key Employee policy taken out by Company X, where would the death proceeds go if the employee left for another company?

1. Company Y

2. The employee's estate

3. Company X

4. No proceeds due to cancellation

The correct answer is: Company X

In a Key Employee policy, the purpose is to provide financial protection to the business in case a vital employee passes away. The company owns the policy and pays the premiums, which means the death benefit is designed to benefit the company that took out the policy rather than the employee or any other party. If the key employee leaves Company X for another job, the death proceeds from the policy will still be directed to Company X, as they retain ownership of the policy regardless of the employee's subsequent employment status. The intent of the policy is to safeguard the company’s financial interests against the loss of a key individual, and this purpose remains unaffected by the employee's career changes. Therefore, the correct assessment of where the death proceeds would go in this situation is that they would remain with Company X.