Question

In: Operations Management

Al Zuni Trading, Inc., purchased a $1 million life insurance policy on the life of one...

Al Zuni Trading, Inc., purchased a $1 million life insurance policy on the life of one of its officers, Thomas McKee. Three months later, McKee resigned from the company. Two years later, McKee died. Did Al Zuni Trading, Inc., have an insurable interest in the life of McKee, and thus, was it entitled to the million dollars? Explain.

Solutions

Expert Solution

Al Zuni Trading,Inc had purchased the life insurance policy on the life of one of its officers.In this case,the policy is a Corporate owned life insurance policy.

In Corporate owned life insurance(COLI) policy,upon the death of an employee,the benefits are payable to the employer and not to the employee's family members or any other beneficiary.The employer is still the beneficiary of the policy even after McKee left the company.So,Al Zuni have an insurable interest in the life of Mckee and hence will be entitled to the million dollars.


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