LLQP Accident & Sickness · Component 2.1 · 30% of the exam
A key person disability policy is owned by and payable to:
- AThe employee's family, who are named as beneficiaries under the contract
- BThe employee, who uses the benefit to replace the income lost during the disability
- The business, which uses the benefit to absorb the cost of the employee's absence
- DThe lender, who holds a collateral assignment over the business's assets
Correct answer: C) The business, which uses the benefit to absorb the cost of the employee's absence
The business suffers the financial loss when a key contributor cannot work, so it holds the contract and receives the benefit to cover recruitment, lost production or temporary replacement.
Why the other options are wrong
- ADisability benefits are paid during life and do not go to a family as beneficiaries.
- BThe employee's own income is protected by a personal policy.
- DA lender's interest would arise under a collateral assignment, not under key person coverage.
Exam tip
Key person coverage pays the business, not the person.
Common mistake
Assuming key person benefits reach the employee's household.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Accident & Sickness module. Written against the published curriculum.
More from component 2
- A group benefits booklet lists AD&D coverage alongside life and LTD. The AD&D benefit pays:
- A hospital indemnity (hospital cash) policy pays:
- Employment Insurance sickness benefits are available to:
- Which government program coordinates with an individual DI policy through a possible offset AND also affects the definition of insurable income?
- A group plan's 'eligibility waiting period' (probationary period) is:
- A CI policy that is 'convertible' allows the insured to:
Practice the whole Accident & Sickness module
Timed sets weighted like the exam, and review of every question you miss. Free to start.