10 - Uses of Life Insurance

Which of these is NOT a reason for a business to buy key person life insurance?

A pension deficiency if the key employee dies

Which of these is NOT considered to be a cost connected with an individual's death?

Business expenses

Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?

Each partner must own a policy on the other partners

When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?

Establishes the needs of the individual and his dependents

What is considered a valid reason for small businesses to insure the lives of its major shareholders?

Fund a buy-sell agreement

Which statement regarding third-party ownership of a life insurance policy is true?

It is used extensively in estate-planning as well as business circumstances

Which of these is NOT relevant when determining the amount of personal life insurance needed?

Local unemployment rate

Which statement regarding a Key Employee Life policy is NOT true?

The beneficiary is named by the key employee

In life insurance, the needs approach is used mostly to establish

how much life insurance a client should apply for

The premiums paid by an employer for his employee's group life insurance are usually considered to be

tax-deductible to the employer

A Key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed?

Company X

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

Which of these factors does NOT influence an applicant's need for life insurance?

Self-maintenance expenses

Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?

Split-dollar plan