If a Key Employee policy is taken out by Company X on its vice president, where would the death proceeds go if the vice president dies after leaving Company X?

In the case of a Key Employee policy, the insurance is specifically designed to protect a business from the financial impact that could result from the loss of a key person essential to its operations. This type of insurance is typically taken out by a company on the life of an employee who is vital to its success, such as a vice president.

When a company purchases a Key Employee policy, it pays the premiums and is the beneficiary of the policy. If the vice president, insured under this policy, dies, Company X will receive the death proceeds. This allows the company to cover potential financial losses, recruit and train a replacement, or address any other needs that arise from the loss of that key employee.

The death proceeds do not go to the vice president's estate, Company Y, or the vice president's beneficiaries because the policy is structured to provide financial support directly to the company that owns the policy, safeguarding its interests. Therefore, the correct answer reflects the intended purpose of a Key Employee policy, which is to ensure that the company receives the financial benefit necessary to sustain its operations following the death of a critical employee.