Massachusetts Health & Accident Insurance Practice Exam

Who typically pays the premiums for key person disability insurance?

1. The disabled employee's family

2. The business itself

3. The insurance agent

4. The shareholders of the company

The correct answer is: The business itself

In the context of key person disability insurance, the premiums are typically paid by the business itself. This type of insurance is designed to protect a business from the financial impact that could result from the loss or incapacitation of a key employee whose skills, knowledge, or experience are critical to the company's operations and success. When a business takes out a key person disability insurance policy, it is the business that benefits from the coverage if the key employee becomes disabled. The payout from the policy can help cover costs such as hiring a temporary replacement, training, and lost revenue due to the absence of the key person. Thus, it makes sense for the business to be responsible for the premium payments, as it directly stands to gain from the protection the policy provides. The other options do not accurately represent the typical practice in this scenario. The disabled employee's family or shareholders are not responsible for paying premiums for a policy that is designed to protect the business's interests, and the insurance agent is not involved in premium payments in this context.