Chapter 10 Exam Uses of Life Insurance
The premiums paid by an employer for his employee's group life insurance are usually considered to be:
tax-deductible to the employer
Which of these is NOT considered to be a cost connected with an individual's death?
Business expenses
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
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Fund a buy-sell agreement
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
In a Key Employee life insurance policy, the third-party owner can be all of the following. EXCEPT:
Insured
Which statement regarding a Key Employee Life policy is NOT true?
The beneficiary is named by the key employee
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 factors does NOT influence an applicant's need for life insurance?
Self-maintenance expenses
In life insurance, the needs approach is used mostly to establish:
how much life insurance a client should apply for
An architecture firm would stand to lose a lot of money in the Which type of policy should the firm purchase on its project manager? event of the death of its project manager.
Key Person Life Policy
C is a key employee at ABC Incorporated. If a Key Employee 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
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 a reason for a business to buy key person life insurance?
A pension deficiency if the key employee dies
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
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
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rate