Washington Life Producer Practice Exam

Which types of life insurance are most commonly used for key employee indemnification?

1. Term, whole, and universal life insurance

2. Term and variable life insurance

3. Universal and short-term life insurance

4. Whole life and investment life insurance

The correct answer is: Term, whole, and universal life insurance

The most commonly used types of life insurance for key employee indemnification include term, whole, and universal life insurance because each type offers distinct advantages relevant to protecting a business against the financial losses that could occur from the unexpected death of a key employee. Term life insurance is often chosen for its affordability and the ability to provide a significant death benefit for a specific period, which can align with a company's need for coverage during critical stages of growth or development. Whole life insurance provides lifetime coverage and builds cash value over time, making it a more stable long-term option for businesses looking to secure their key employees. The cash value can also serve as an asset for the business. Universal life insurance combines flexibility with growth potential, allowing for premium adjustments and the ability to accumulate cash value based on market interest rates. This adaptability is advantageous for businesses that may need to reassess their coverage amounts or financial strategies. By utilizing a combination of these types, businesses can effectively safeguard against the potential financial impact of losing an essential employee, thus ensuring continuity and stability.