Life Ch. 11 Uses of Life Insurance
Which of these 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 A void in leadership if the key person were to die The loss of company revenues while a replacement is being sought A pension deficiency if the key employee dies
All of these are reasons for a business organization to purchase key person life insurance EXCEPT "The increased pension liability resulting from the key person's death".
Which of these is NOT relevant when determining the amount of personal life insurance needed? Existing life insurance coverage Local unemployment rate Household income Household debt
In calculating the amount of personal life insurance needed, all of this information would be relevant except for local unemployment rates.
Which of these is NOT considered to be a cost connected with an individual's death? Funeral expense Tax liability Business expenses Probate costs
All of these are considered to be costs associated with an individual's death EXCEPT business expenses.
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 Takes into account the present value 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
Needs analysis is a method of life insurance planning which identifies the needs of an individual and the individual's dependents.
A Split-dollar plan would most likely be had by a(n) hourly employee janitor department manager temporary worker
A Split- dollar plan is considered a nonqualified plan because it is only offered to highly valued employees. Department manager.
Which of these factors does NOT influence an applicant's need for life insurance? Lifestyle of the applicant Number of dependents Future educational costs of the dependents Self-maintenance expenses
An individual's need for a death benefit for survivors is influenced by all of the following factors EXCEPT self-maintenance expenses.
What is considered a valid reason for small businesses to insure the lives of its major shareholders? To provide an income for the surviving dependents Reduce the company's tax liability To pay for final expenses Fund a buy-sell agreement
Life insurance is purchased to fund a buy-sell agreement in the event of the death of a major shareholder in a business.
In life insurance, the needs approach is used mostly to establish which type of life insurance a client should apply for how much life insurance a client should apply for which company a client should use when applying for life insurance what the maximum amount the client can spend on life insurance
The "needs approach" in life insurance is most useful in determining the amount of life insurance to be recommended to a client..
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
The amount an employer pays for his employee's life insurance is typically deductible to the business.
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 Provides funds for final expenses if the child were to die Provides living benefits for the child's college education Provides child with insurance now, in case the child becomes uninsurable later
The correct answer is "If both parents were to die, it would provide death benefits to the child". An insurance policy on a child would not pay any benefits if one or both of the parents died. All of the other answers are valid reasons for buying life insurance on a child.
