Chapter 11- Uses of Life Insurance

What is considered a valid reason for small businesses to insure the lives of its major shareholders?

Fund a buy-sell agreement

Which of the following disability buy-sell agreements is best suited for businesses with a small number of partners?

Cross-purchase agreement

When using the needs approach for life insurance planning, lump sums may be created for all of the following reasons EXCEPT

Employee benefits

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 the individual and his/her dependents

Which of the following is NOT a reason for a business to buy key person life insurance?

An increased pension liability if the key employee dies

Which of these factors does NOT influence an applicant's need for life insurance?

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

Employers often purchase life insurance on a key employee in order to

help offset the cost of finding and training a replacement if the employee dies

With life insurance, the needs approach is used primarily in determining

how much life insurance a client should apply for

According to the needs approach, an emergency reserve fund's primary purpose is to

pay for unexpected expenses

The premiums paid by an employer for his employee's group life insurance are usually considered to be

tax-deductible to the employer

Which of these is NOT considered to be a cost connected with an individual's death?

Business expenses

Which of these is NOT relevant when determining the amount of personal life insurance needed?

Local unemployment rates

Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner?

Unemployment tax expenses