L10 - Uses of Life Insurance

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". Third-party ownership of a life insurance policy is widely used in business settings and estate-planning situations.

What is true regarding a Key Employee Life policy?

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 company purchases, owns, pays the premiums and is the beneficiary

What factors influence's an applicant's need for life insurance?

Lifestyle of the applicant, Number of dependents, & Future educational costs of the dependents

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?

With Key Person Insurance, the company purchases, owns, pays the premiums and is the beneficiary of the life insurance policy on the key person.

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