Key-person disability insurance

• A. Covers medical expenses for all employees.
• B. Funds expansion projects.
• C. Provides pension to retirees.
• D. Replaces revenue lost when a key employee is disabled.

Answer: (D)

Key-person disability insurance focuses on the business impact of a crucial employee being unable to work. If that key person becomes disabled, the policy provides a payout to the business to offset revenue losses and cover ongoing costs during the transition. This helps keep operations going, maintain payroll, and possibly fund recruitment or retraining to fill the gap. It’s not meant to pay medical bills for all employees, fund expansion projects, or provide retirees’ pensions. Those functions come from other types of coverage or benefits. Here, the goal is clear: replace revenue lost when a critical employee can’t work, preserving the company’s financial stability.