NEB - LifeIN - Uses of Life Insurance

Which of the following is NOT a reason for a business to buy key person life insurance?

An increased pension liability if the key employee dies.

Which of these is NOT considered to be a cost connected with an individual's death?

Business expense (IS CONSIDERED: funeral expenses, tax liability, and probate costs)

According to the needs approach, an emergency reserve fund's primary purpose is to ______.

Cover the cost of unexpected expenses

Which of the following disability buy-sell agreements is best suited for business with a limited number of partners?

Cross-purchase agreement (is a document that allows a company's partners or shareholders to purchase the interests or shares of a partner who dies, becomes disabled, or retires)

When using the needs approach for life insurance planning, a lump sum may be created to provide for all of the following EXCEPT _______.

Employee benefits

What is considered a valid reason for small corporations to insure the lives of its major stockholders?

Fund a buy-sell agreement

With life insurance, the needs approach is used primarily in determining ______.

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?

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?

Local unemployment rates (Relevant: existing life insurance coverage, household income, and household debt)

Which of these factors does NOT influence an individual's need for life insurance?

Self-maintenance expenses (DOES INFLUENCE: lifestyle of the applicant, number of dependents, future educational costs of the dependents)

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?

Split-dollar (split-dollar plan is an arrangement where an employer and an employee share in the cost of purchasing life insurance policy on the employee, who is allowed to name the beneficiary)

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 the following is NOT considered to be an expense for surviving family members of a deceased wage earner?

Unemployment tax expenses (IS CONSIDERED: estate taxes, funeral expenses, living expenses)

Employers often purchase life insurance on a key employee in order to ______.

pay for finding and training a replacement if the employee dies prematurely.