Chapter 12 Exam

Which of these is not a reason for a business to buy key person life insurance

A pension deficiency if the key employee dies

C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true?

ABC is the policyowner, C is the insured, and ABC is the beneficiary

Which of these is not considered to be a cost connected with an individuals death

Business expenses

A key employee policies taken out by company X on his vice president. 10 years later, this employee leaves company ex and vegans working for a company why. If this individual were to die in the policy still in force in unchanged, where would the death proceeds be directed ?

Company X

Company Z has a cross purchase buy-sell agreement in place among it's 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

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

Fund a buy sell agreement

Which statement regarding third-party ownership of a life insurance policy of true

It is used extensively in estate planning as well as business circumstances

Which of these factors does not influence in applicants need for life insurance

Self-maintenance expenses

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.

Which statement regarding a key employee life policy is not true

*The beneficiary is named by the key employee (The company names the beneficiary, not the employee.)

List relevant factors when determining the amount of personal life insurance needed

1. Existing life insurance coverage 2. household income 3. household debt

K is an insured under your life insurance policy owned by a third-party. Which of these statements is true

Kay has no ownership rights

An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?

Key Person Life Policy

In a key employee life insurance policy, the third-party owner can be all the following

Applicant, owner, payor

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

Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary

Split-dollar plan A split-dollar plan is an arrangement where an employer and an employee share in the cost of purchasing a life insurance policy on the employee. The employee is also allowed to name the policy beneficiary.

The premiums paid By an employer for his employees group life insurance are usually considered to be

tax-deductible to the employer

Which of these is relevant when determining the amount of personal life insurance needed?

Household debt, Household income, Existing Life insurance Coverage.

Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE?

Each partner owns a $500,000 policy on their partner's life The amount of the policy is equivalent to each partners share of the business. When one partner dies, the other partner receives the death benefit from the life insurance on the deceased partner, which is then used by the deceased partner ownership of the business

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

Three law partners form a Cross-Purchase Buy and Sell agreement. This agreement is funded with individual life insurance. How many total life policies are needed for this agreement?

6 Each partner owns, is the beneficiary of a and pays the premiums for life insurance on the other partners equal to his or her share of the purchase price

List some factors that influence in applicants need for life insurance

Lifestyle of the applicant, number of dependent's , future educational cost of the dependents

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

Local Unemployment Rate

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

Local unemployment rate

In life Insurance, the needs approach is used mostly to establish

how much life insurance a client should apply for The "needs approach" in life insurance is most useful in determining the amount of life insurance to be recommended to a client.

In life insurance, the needs approach is used mostly to establish

how much life insurance a client should apply for The "needs approach" in life insurance is most useful in determining the amount of life insurance to be recommended to a client.

What cost are considered to be connected with an individuals

1. Funeral expense 2. tax liability 3. probate cost

List some reasons for purchasing life insurance on the life of a minor

1. Provides funds for final expenses if the child were to die 2. Provide child with insurance now, in case the child becomes uninsurable later 3. Provides living benefits for the child's college education

What statements regarding a key employee life policy are true

1. The application must be signed by the key employee 2. purpose is to prevent financial loss that may ensue if a key employee dies 3. the company purchases, owns, pays the premiums and is the beneficiary

List some reasons for a business to buy key person life insurance

1. The reduction in sales as a direct result from death of the key employee 2. A void in leadership if the key person were to die 3. the loss of company revenues while a replacement is being sought

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

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 a Key Employee life insurance policy, the third-party owner can be all of the following EXCEPT

insured