Tax treatments of insurance premiums, proceeds and dividends

All of the following are business uses of life insurance EXCEPT

Funding against company's general financial loss

This is not a third-party ownership of a life insurance policy

An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure a loan

Employer contributions made to a qualified plan

Are subject to vesting requirements.

A key person insurance policy can pay for which of the following?

Costs of training a replacement

Which of the following is true regarding taxation of dividends in participating policies?

Dividends are not taxable since they are the return of unused premiums.

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

Executive is the owner, and the executive pays the premium

Which of the following is NOT true regarding a nonqualified retirement plan?

It needs IRS approval.

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?

Life expectancy

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

Premiums are not tax deductible as a business expense.

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?

The insured may choose to convert to term or permanent individual coverage. Insurer determines the type of coverage to convert to.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT?

The policy is owned by the company.

Which of the following best defines the "owner" as it pertains to life settlement contracts?

The policyowner of the life insurance policy

Which of the following is NOT true of life settlements?

The seller must be terminally ill