Chapter 9 Exam - Uses of Life

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

A pension deficiency if the key employee dies

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

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 need of the individual and his dependents

In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT: -Applicant -Owner -Payor -Insured

Insured

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.