Chapter 10 - Uses of Life Insurance

C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true? - ABC is policy owner, C is insured, husband is beneficiary - ABC is policy owner, C is insured, ABC is beneficiary - C is policy owner and insured, ABC Is beneficiary - C is policy owner, insured, and beneficiary

- ABC is policy owner, C is insured, ABC is beneficiary

Which of these is NOT considered to be a cost connected with an individual's death - funeral expense - tax liability - business expenses - probate costs

- business expenses

An engineering firm that would suffer financially from the death of a project manager should purchase a: - buy and sell agreement - key person life insurance - deferred annuity contract - cross purchase plan

- key person life insurance

Which of these factors does NOT influence an applicant's need for life insurance? - lifestyle of applicant - # of dependents - future educational costs of dependents - self maintenance expenses

- self maintenance expenses

A loss-purchase buy and sell agreement among 3 partners, funded with individual life insurance, would require how many policies? 3 6 9 12

6 - each partner owns, is the beneficiary of and pays the premiums for life insurance of the other partners equal to his or her share of the purchase price

In a Key Employee life insurance policy, the third-party owner can be all of the following EXCEPT: applicant owner payor insured

insured

When an individual is planning to protect his family with life insurance, one method of doing so is called need analysis. What exactly does need analysis involve? - established the needs of the individuals and his dependents - takes into account the present vale of the future income earned by the breadwinner - places a dollar value on the life of the individual - establishes the investment risk level acceptable to the individual

- established the needs of the individuals and his dependents

In life insurance, the needs approach is used mostly to establish: - which type of life insurance a client should apply for - how much life insurance a client should apply for - which company a client should use when applying for life insurance - what the maximum amount the client can spend on life insurance

- how much life insurance a client should apply for

Which of these is NOT a reason for purchasing life insurance on the life of a minor? - if both parents were to die, it would provide death benefits to the child - provides funds for final expenses if the child were to die - provides living benefits for the child's college education - provides child with insurance now, in case the child insurable later

- if both parents were to die, it would provide death benefits to the child --> because not their policy

Which statement regarding a Key Employee Life Policy is NOT true? - the application must be signed by the Key Employee - its purpose is to prevent the financial loss that may ensue if a key employee dies - the beneficiary is named by the key employee - the company purchases, owns, pay the premiums and is beneficiary

- the beneficiary is named by the key employee