PSI Ohio Insurance Practice Exam

What type of insurance should a company purchase to insure the life of its CEO?

1. Health insurance

2. Term life insurance

3. Key person insurance

4. Group insurance

The correct answer is: Key person insurance

A company should purchase key person insurance to insure the life of its CEO because this type of insurance is specifically designed to protect a business from the financial impact of losing a key employee. Key person insurance provides a death benefit to the company, allowing it to cover expenses related to the loss of the CEO and providing financial stability during a challenging time. It helps the organization offset any potential loss of revenue that may result from the unexpected passing of a vital leader as they can be instrumental in driving business operations and securing client relationships. In contrast, health insurance generally covers medical expenses and does not provide financial assistance in the case of death. Term life insurance, while beneficial for individuals, does not specifically cater to the needs of a business in terms of protecting its interests related to key personnel. Group insurance usually refers to policies that cover a group of individuals, typically employees, but does not focus on the unique financial risk associated with losing a pivotal employee like the CEO. Therefore, key person insurance is the most appropriate choice in this scenario.