What type of policy covers the costs of providing a paycheck to a disabled employee?

The correct answer is about key employee policies, which are specifically designed to protect the financial interests of a business in the event that a key employee becomes disabled and unable to work. This type of policy typically provides benefits that cover the loss of income due to the disability of that key employee, ensuring that the business can continue to operate and manage expenses during that period.

Key employee policies often include provisions for disability coverage that can help fund a paycheck for the disabled employee or support hiring a temporary replacement. This aspect is vital for businesses that rely heavily on specific employees whose absence could significantly impact operations and revenue.

In contrast, accidental death and dismemberment policies provide benefits primarily in cases of severe injuries or death, rather than covering lost income due to disability. Major medical and basic hospital policies focus on medical expenses and hospitalization, which do not directly address income replacement for disabled employees. Therefore, the focus on covering paycheck costs through a key employee policy correctly aligns with the needs of businesses concerned about the financial ramifications of employee disability.