Chapter 10 Business Uses for Life Insurance

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What is Buy Sell Plan?

Agreement is a legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled.

Deferred Compensation Plan

Arrangement in which the employer agrees to make future payment to an employee after retirement.

What is the most common use for life insurance by businesses?

As an employee benefit, which serves as a protection for employees and their beneficiaries.

What else is Buy Sell Plan referred to as?

Business Continuation Agreement

Key Person Insurance

Business can lower the risk of such loss by the use of Key Person Insurance.

Types of Buy Sell Agreements Used for Partnerships and Corporations

Cross Purchase Method, Entity Purchase, Stock Purchase, Stock Redemption

What are other forms of life insurance businesses can use?

Key Person and Buy Sell Plans

Split Dollar Plan

Life insurance plan in which an employer and employee share the cost of the insurance premium

Salary Continuation Plan

Same as the Deferred Compensation Plan with one exception, the employee must continue to work for the company until retirement

Employee Benefit Plan

Split Dollar Plan, Deferred Compensation, Salary Continuation

What does the employee have to do with a Salary Continuation Plan?

Stay with the company until retirement

What is the Split Dollar Plan intend on doing for the employee?

To give the employee an incentive to remain with the employer.

With Key Person Insurance the key employee is the insured, and the business is the policy owner and would receive the death benefit?

True


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