8 - Uses of Life Insurance
Employers often purchase life insurance on a key employee in order to provide an income to the deceased key employee's family pay for funeral costs provide the employer with a tax credit pay for finding and training a replacement if the employee dies prematurely
pay for finding and training a replacement if the employee dies prematurely
Which of the following disability buy-sell agreements is best suited for businesses with a limited number of partners? split-dollar plan entity agreement cross-purchase agreement key person plan
cross-purchase agreement
When using the needs approach for life insurance planning, a lump sum may be created to provide for all of the following EXCEPT final expenses charitable donations education employee benefits
employee benefits
With life insurance, the needs approach is used primarily in determining which insurance company to purchase the coverage from how much life insurance a client should apply for the type of life insurance that should be purchased a budget for the surviving dependents to follow in the event of the client's death
how much life insurance a client should apply for
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? identifies the needs of an individual and the individual's dependents takes into account the PV of 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
identifies the needs of an individual and the individual's dependents
Which of the following is NOT a reason for a business to buy key person life insurance? the reduction in sales as a direct result from death of the key employee void in leadership loss of company revenues increased pension liability if the key employee dies
increased pension liability if the key employee dies
Which of these factors does NOT influence an individual's need for life insurance? lifestyle of the applicant number of dependents future educational costs of the dependents self-maintenance expenses
self-maintenance expenses
XYZ Corp. gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this? split-dollar cross purchase key employee deferred compensation
split-dollar
Which of these is NOT considered to be a cost connected with an individual's death? funeral expenses tax liability business expenses probate costs
business expenses
According to the needs approach, an emergency reserve fund's primary purpose is to pay off debt cover the cost of unexpected expenses pay the cost of life insurance provide a supplemental income source
cover the cost of unexpected expenses
What is considered a valid reason for small corporations to insure the lives of its major stockholders? to provide an income for the surviving dependents reduce the company's tax liability to pay for final expenses fund a buy-sell agreement
fund a buy-sell agreement
The premiums paid by an employer for his employee's group life insurance are usually considered to be tax-deductible to the employer partially deductible to the employee tax-deductible to the employee taxable income to the employee
tax-deductible to the employer
