West Virginia Life Insurance Practice Exam 2025 – Complete Study Resource

In the context of a Key Employee policy, when an employee who is covered under the policy leaves for another job, the death proceeds are designated to go to the company that originally took out the policy, in this case, Company X. Key Employee policies are life insurance policies where the employer is the owner and the beneficiary, and they are intended to protect the business against financial loss that may occur due to the unexpected death of a key employee.

When the key employee exits the company, the insurance policy typically remains in place until the company decides to cancel it or transfer it to another employee if that is an option provided in the policy. This means that the benefits of the policy, including death proceeds, are kept within the organization to help cover the loss or disruption that might arise from the departure of a critical team member. The employer utilizes these proceeds to manage ongoing operational needs or to find a replacement for the key employee.