Uses of Life Insurance

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

6

In a Key Employee Life Insurance policy, the third party owner can be all of the following EXCEPT?

insured

Which of these factors does NOT influence an applicants need for life insurance?

self maintenance expenses

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

split dollar plan

Which statement regarding a Key Employee Life Insurance is NOT true?

the beneficiary is named by the key employee

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

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 with Company Y. If this individual were to die and the policy is still enforce and unchanged, where would the death proceeds be directed?

Company X

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

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

local unemployment rate

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

business expenses

In life insurance, the needs approach is used mostly to established ?

how much life insurance a client should apply for

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

a pension deficiency if the key employee dies

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

tax deductible to the employer