Quiz: Third-Party Policy Ownership

Who normally owns life insurance that is used to meet business insurance needs? A. the business jointly with the insured B. the insured C. the employees D. the business

D. the business

With respect to third-party ownership of life insurance in the personal insurance market, all the following statements are true EXCEPT: A. Third-party ownership is the basis of stranger-oriented life insurance (STOLI). B. Policy ownership can be transferred to anyone without there having to be an insurable interest between that person and the insured. C. The insured has the right to name the beneficiary. D. Third-party ownership is common in estate planning.

C. The insured has the right to name the beneficiary.

All of the following statements about key person life insurance are correct, EXCEPT: A. The business applies for, owns, and is the beneficiary of the policy covering the life of a key employee. B. Life insurance used as key person life is normally owned by the business rather than the insured. C. Upon the insured employee's death, the employee's surviving family receives the policy's death benefit. D. Key person, or key employee, life insurance is an example of third-party ownership.

C. Upon the insured employee's death, the employee's surviving family receives the policy's death benefit.

The primary reason for using third-party ownership in personal life insurance for estate planning purposes is to: A. reduce the tax rate used in calculating the estate tax B. transfer the estate tax liability from the owner to the beneficiary C. convert the life insurance proceeds from an estate taxable asset to an income taxable asset D. remove the life insurance proceeds from the insured's estate and thus reduce the value of the taxable estate

D. remove the life insurance proceeds from the insured's estate and thus reduce the value of the taxable estate