CHAPTER FOUR: TAXES, RETIREMENT, AND OTHER INSURANCE CONCEPTS

Employer contributions made to a qualified plan

Are subject to vesting requirements

All of the following are personal use of life insurance EXCEPT Buy-Sell agreement, survivor protection, estate creation, or cash accumulation

Buy- sell agreement

What does liquidity refers to in a life insurance policy?

Cash value can be borrowed at any time

A key person insurance policy can pay for which ?

Cost of training a replacement

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize ?a) Estate liquidation b) Nonpayment of premium c) Change of beneficiary d) Viatical settlement

D

Which terms is used to name the nontaxed return of unused premiums ?

Dividend

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

The benefit is received tax free.

Which of the following best defines the "owner" as it pertains to life settlement contracts?

The policy owner of the life insurance policy

What is the purpose of key person insurance?

To minimize the risk of financial loss caused by the death of a key employee

All of the following benefits are provided by Social Security, EXCEPT:

Unemployment Income

What is the name of the insured who enters into a viatical settlement

Viator

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

Survivor protection

which of the following is not true of life settlements ? a.the seller must be terminally ill b.they could be used for key person coverage c.they could be sold for amount greater than the cash valued d.they involve insurance policies with large face amounts

A

Who is a third-party owner?

A policyowner who is not the insured

All of the following are business uses of life insurance EXCEPT: 1. funding against financial loss caused by the death of a key employee 2. funding business continuation agreements 3. funding against general company financial loss 4. compensating executives

3

In a life settlement contract, a life settlement broker represents

Policy Owner

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

the business owns the policy, pays the premiums and is the beneficiary