Ch 10 Exam

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

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

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 needs of the individual and his dependents

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 is true?

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

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 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

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

the beneficiary is named by the key employee