Life Insurance- Basics

How mant policies are necessary to cover a cross purchase( buy/sell agreement) between 3 people?

6

For an insurance contract to be valid in the State of CA, when must insurable interest exist

At the time of application for a policy on the insured

If a loss occurs, insurance policies pay the proceeds to

Beneficiary

Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount?

Buy-sell agreement

What does "liquidity" refer to in a life insurance policy

Cash values can be borrowed at any time

A key person insurance policy can pay for which of the following?

Costs of training a replacement

Which of the following would be a unique benefit life insurance has over other types of insurance

It may perform the function of cash accumulation

Kayla's husband die in the plane crash. She needs a new source if funding that will help her put her child through daycare. Which of the following would be the best source.

Life Insurance Proceeds

What is the term used when a person sells his assets as a way to gain money

Liquidation

Which of the following insurance providers would be considered a risk of sharing arrangement?

Reciprocal

Taking a defensive driving course or installing deadbolt locks on the doors of a home are examples of which of the following?

Risk reduction

What are liquid resources in a life insurance contract?

The cash value available to the insured

Which of the following statements is true concerning the creditors of the decreased insured?

The creditors have rights to the proceeds if they can show evidence of valid assignment.

Which of the following would be least likely to be considered a legitimate need that would be paid by insurance proceeds?

Vacation travel expenses

Which of the following types if insurance policies would perform the function of cash accumulation

Whole life

A key person insurance policy can pay for which of the following?

cost of training and replacement

The risk management technique is used to prevent a specific loss by not exposing yourself to the activity is called

Avoidance

Bobby has named his wife, Darby, as the personal representative of his estate. Darby is also the beneficiary of Bobby's life insurance policy. How will the claim for the life insurance he handled?

Darby, the beneficiary, will file the claim with the life insurance company by submitting the death certificate as proof of loss.

The following are legitimate uses of insurance in a business setting EXCEPT

Funding against general company financial loss.

Attempting to determine how much insurance an individual would require based upon their financial objectives is known as

Needs Approach

Two equal partner in a bussines worth 150,000 are using a Cross Purchase plan to protect against the death of each other. Which of the following statements would be correct

Partner A buys a policy on partner B in the amount of 75,00 naming Partner A the beneficiary.

What are the personal uses of life insurance

Survivor protection, estate creation and conservation, cash accumulation, and liquidity

In 2000, a law firm purchases a buy-sell agreement policy on each of its partners. In 2005, one partner left to start a new practice; however, the firm continued to pay the premiums on the policy. In 2007, the former partner died. The partners of the firm filed a claim on the policy to collect the death benefit despite the fact that the deceased was NOT part of the firm or its leadership. The insurer

Will pay the death claim to the beneficiary for this policy as written since insurable interest existed at the time of application

An insurer is helping a married couple determine their children's needs, assests, and liabilities in the event that the spouses should die. What is the term most closely associated with this?

survivor protection

An insurer's liability shall be limited to

the face amount of an individual insurance policy, subject to any exclusions and riders as applicable, minus any outstanding policy loans and interest payments due the insurer

What is the purpose of key person insurance

to lessen the risk of financial loss because of the death of a key employee

All of the following actions by a person could be described as risk avoidance EXCEPT

Investing in the stock market

Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy

The employer is the owner and beneficiary.

Which of the following is NOT true regarding the Needs Approach method of determining the value of an individuals life?

Need is preficted using the number of years until the insured's retirement.

All of the following are true of Key Person insurance EXCEPT

The plan is funded by permanent insurance only.

Which of the following is the best reason to purchase life insurance rather than annuities

To create an estate

Which of the following is NOT a goal of risk retention

To minimize the insured's level of liability I the event of loss

When an individual purchases insurance, what risk management technique is he or she practicing?

Transfer

Which of the following insurance providers would be considered a risk sharing agreement

reciprocal

For an insurance contract to be valid in the State of California, when must insurable interest exist?

At the time of application for policy on the insured

Which of the following would describe a legal document which would dictate whou can buy a deceased partner's share of a business and for what amount

Buy-sell agreement

All of the following are examples of risk retention EXCEPT

Premiums

Which of the following is correct concerning the taxation of a Key Person Life Insurance Policy Premium and death benefit?

premiums are not deductible as a business expense and the death benefit is not taxable to the company