Chapter exam- uses of life insurance
What is considered a valid reason for small business to insure the lives of its major shareholders
Fund a buy-sell agreement
Which of these is NOT a reason for a business to buy key person life insurance?
A pension deficiency if the key employee dies
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
Which of these is NOT considered to be a cost connected with an individual's death
Business wxpenses
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
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
K is an insured under a life insurance policy owned by a third party. Which of these statements is true?
K has no ownership rights
Which statement regarding a key employee life policy is NOT true?
The beneficiary is named by the key employee
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 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
In life insurance, the needs approach is used mostly to establish
how much life insurance a client should apply for
In a key employee life insurance policy, the third party owner can be all of the following, EXCEPT
insured
The premiums paid by an employer for his employee's group life insurance are usually considered to be
tax-deductible to the employer
A Key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed?
Company X
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
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 statement regarding third party ownership of a life insurance policy is true
It is used extensively in estate-planning as well as business circumstances
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rate