Ch. 10 Uses of Life Insurance

Which of these is NOT considered to be a cost connected with an individual's death? Funeral expense Tax liability Business expenses Probate costs

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? The employee's family Company Y Company X The employee's estate

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? One policy is owned and paid for by the company Each partner must own a policy on the other partners One policy is owned by the company and premiums are split equally among the partners Each partner owns their own individual policy

Each partner must own a policy on the other partners

Which statement regarding third-party ownership of a life insurance policy is true? Beneficiary is required to be irrevocable Policy cannot be assigned once issued It is illegal in most states It is used extensively in estate-planning as well as business circumstances

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? Lifestyle of the applicant Number of dependents Future educational costs of the dependents Self-maintenance expenses

Self-maintenance expenses

Which statement regarding a Key Employee Life policy is NOT true? The application must be signed by the key employee Its purpose is to prevent the financial loss that may ensue if a key employee dies The beneficiary is named by the key employee The company purchases, owns, pays the premiums and is the beneficiary

The beneficiary is named by the key employee