Uses of Life Insurance

Which of these is NOT considered to be a cost connected with an individuals 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

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 relevant when determining the amount of personal life insurance needed

Local unemployment rate

Which of these factors does not influence an applicants 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

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

C is a key employee at ABC Incorporated. If a Key Employee life 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

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

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 stockholders

Fund a buy-sell agreement

Which of these is not a reason for purchasing life insurance on a minor

If both parents were to die, it would provide death benefits to child

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

K is an insured under a life insurance policy owned by a third party. Which of these statements is true?

K has no ownership rights

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 statement regarding Key Employee Life policy is NOT true

The beneficiary is named by the key employee

In a key employee life insurance policy, the third party owner can be all of the following except

insured

The premiums paid by an employer for his employees group Life insurance are usually considered to be

tax-deductible to the employer