California Insurance License Exam Practice Test Practice Question
What is the purpose of key person insurance?
Correct Answer: D
Rationale: Key person insurance primarily aims to protect a business from financial losses resulting from the death or incapacitation of a crucial employee. This coverage helps maintain stability by compensating for decreased earnings and ensuring the business can cover operational costs during a challenging transition.
Option A is incorrect as key person insurance does not provide retirement benefits; it focuses on business continuity. Option B is wrong because health insurance benefits are separate from key person insurance. Option C misrepresents the purpose; while it may allow for a buy-sell agreement, that is not the primary intent of this insurance.
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