Ch. 12 - Uses of Life
Which of these is NOT considered to be a cost connected with an individual's death? a. funeral expense b. tax liability c. business expenses d. probate costs
business expenses
According to the needs approach, an emergency reserve fund's primary purpose is to a. pay off debt b. cover the cost of unexpected expenses c. pay for the cost of life insurance d. provide a supplemental income source
cover the cost of unexpected expenses
Which of the following disability buy-sell agreements is best suited for businesses with a limited number of partners? a. split dollar plan b. entity agreement c. cross-purchase agreement d. key person plan
cross-purchase agreement
When using the needs approach for life insurance planning, a lump sum may be created to provide for all of the following EXCEPT a. final expenses b. charitable donation c. education d. employee benefits
employee benefits
What is considered a valid reason for small corporations to insure the lives of its major stockholders? a. to provide an income for the surviving dependents b. reduce the company's tax liability c. to pay for final expenses d. fund a buy-sell agreement
fund a buy-sell agreement
Which of the following is NOT a reason for a business to buy key person life insurance? a. The reduction in sales as a direct result from death of the employee b. A void in leadership if the key person were to die c. The loss of company revenues while a replacement is being sought d. An increased pension liability if the key employee dies
An increased pension liability if the key employee dies
With life insurance, the needs approach is used primarily in determining a. which insurance company to purchase the coverage from b. how much life insurance a client should apply for c. the type of life insurance that should be purchased d. a budget for the surviving dependents to follow in the event of the client's death
how much life insurance a client should apply for
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? a. identifies the needs of an individual and the individual's dependents b. takes into account the present value of future income earned by the breadwinner c. places a dollar value on the life of the individual d. establishes the investment risk level acceptable to the individual
identifies the needs of an individual and the individual's dependents
Which of these is NOT relevant when determining the amount of personal life insurance needed? a. existing life insurance coverage b. local unemployment rates c. household income d. household debt
local unemployment rates
Employers often purchase life insurance on a key employee in order to a. provide an income to the deceased key employee's family b. pay for funeral costs c. provide the employer with a tax credit d. pay for finding and training a replacement if the employee dies prematurely
pay for finding and training a replacement if the employee dies prematurely
Which of these factors does NOT influence an individual's need for life insurance? a. lifestyle of the applicant b. number of dependents c. future educational costs of the dependents d. self-maintenance expenses
self-maintenance expenses
XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this? a. split-dollar b. cross purchase c. key employee d. deferred compensation
split-dollar
The premiums paid by an employer for his employee's group life insurance are usually considered to be a. tax-deductible to the employer b. partially deductible to the employee c. tax-deductible to the employee d. taxable income to the employee
tax-deductible to the employer
Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner? a. estate taxes b. unemployment tax expenses c. funeral expense d. living expenses
unemployment tax expenses