7.2 Flashcards
One of the primary purposes of life insurance is to ______.
provide a ‘stream of income’ for the surviving family beneficiaries if and when the insured breadwinner dies during the policy’s term
Life insurance is a lawful contract that will pay a specified sum upon an insured’s death with no necessary upkeep by either the policyowner or beneficiary, outside of ______.
paying the premium on time
A ______ is a financial assessment conducted by life insurance agents to determine the proper type and amount of life insurance to cover an individual and/or family’s financial needs in the event of the breadwinner’s premature death.
‘need’s analysis’
A complete assessment of a family’s ______ will help determine the correct life insurance provider, type of insurance, death benefit amount, and the amount of monthly premium the insured can afford to maintain the policy.
financial needs
In assessing the correct amount of life insurance necessary to meet the needs of a client, the ______ and ______ assessments are commonly used by agents in the field.
‘human life value’
‘family needs’
Using the ______, an agent can determine the correct amount of life insurance based on the client’s occupation, annual income, planned retirement age, short and long-term family expenses, and finally, the depreciation in the value of the dollar, known as inflation, in the future.
Human Life Value assessment
The Human Life Value assessment determines ______ to formulate the corresponding death benefit, should the client die today, to continue to provide for the surviving family in the future based on the client’s occupational income history and future potential. Essentially this assessment provides the surviving family with the ______.
a client’s income potential
income stream that is lost upon the death of the breadwinner
Factors to determine the human life value of an individual are net annual salary, annual expenses, working years remaining before retirement, and ______.
Depreciating value of the dollar over time (inflation)
Using the ______, an agent can determine the correct insurance amount based on the needs of the family.
Family Needs assessment
The Family Needs Assessment is more commonly used because it ______ including medical deductibles and final expenses, surviving family maintenance income (mortgage, cost-of-living expenses), and future income needs such as college tuition and spousal retirement income.
evaluates the specific financial needs of the client’s family
The Family Needs assessment should ______ to determine the correct death benefit to allow the family to survive past the insured’s death.
list all of the family’s future financial needs
The ultimate goal of a life insurance agent is to ______.
find the best policy for the client based on the client’s needs and budget
The client’s needs, not the ______, should be the focus when determining the policy type, premium and policy face amount.
agent’s desire for commission
Offering an ethically sound recommendation to the client not only ensures the agent with a commission, it will ______.
lead to referrals and additional clients
After determining the death benefit amount necessary to sustain financial security for the surviving beneficiaries, the agent should ______.
recommend a life insurance policy that not only fits these needs, but is also sustainable in premium payments
The agent should evaluate both ______ policies as well as level, increasing or decreasing premiums, in determining the correct life policy that best fits the client’s budget.
‘whole life’ and ‘term life’
Life insurance is similar for a business as it is for an individual in protecting against ______.
the financial loss associated with premature death
Be it a sole proprietorship, partnership or corporation, life insurance is needed to ensure capital is adequate and available to ______.
protect the integrity of the company if such event were to occur
A ______ plan involves two parties, usually an employer and employee, who split premium payments on a whole life policy.
split-dollar
Under the split dollar arrangement, both the employer and employee pay the policy’s premium together. The employer pays a specific amount, usually equal to the ______, and the employee pays the remaining premium amount.
annual increase in the policy’s cash value
In regards to the split dollar plan, if the employee were to die, the policy’s death benefit proceeds would be payable to the employer and the beneficiary chosen by the employee. The employer would receive an amount equal to ______ The remaining death benefit proceeds would be distributed to the policy’s beneficiary.
either the cash value of the policy at the time of death, or an amount equaling the total premiums paid by the employer, whichever is greater.
The potential negative impact to a business following the death one of its key members, such as its founder or other top executives, can cause the business to cease operating. To transfer this risk, businesses often ______, paying its premium and assigning itself as the beneficiary in the event of death.
purchase life insurance on its key members
Life insurance provides the business with financial security to meet its financial obligations, supplement the company while it finds a new executive to replace the deceased member, or to ______.
help distribute death benefit proceeds to shareholders if the company dissolves
Essentially, ______ policies are just as crucial to a business as a personal life insurance policy is to the surviving members of a family upon the death of the breadwinner.
key-person
The death of a sole proprietor can create a large financial burden for surviving family members. Life insurance provides the financial assistance needed to maintain a standard of living for surviving dependents of a sole proprietor and to ______.
facilitate the potential sale of the business
Life insurance can also be used to ______ after the death of one of its partners or corporate shareholders.
fund a partnership or corporation
A buy-sell agreement, also referred to as a ______ agreement, is defined as a financial agreement or arrangement that protects business partners and corporate shareholders against financial loss by securing a predetermined fair market value for each partner or that, upon a predetermined event such as death, is sold to the remaining partners or shareholders in the business to ensure the continuation of the partnership or corporation.
‘buyout’
A cross-purchase plan is typically used if ______. Each partner purchases a life insurance policy on the other partners in the company with face amounts equal to each partner’s share of ownership in the company.
only a few partners exist within a company
An entity plan is typically used if ______. Instead of each partner purchasing multiple life policies, the company itself purchases a life policy on each partner and serves as the policyowner of each policy. Each partner’s face amount is based on his or her share of ownership in the company.
several partners exist within a company
As an example of an Entity Plan, if 5 partners exist, the company purchases 5 life policies, one for each partner. The company ______, as well as serves as the policy’s beneficiary.
pays each policy’s premiums
Regarding the Entity Plan, upon the death of an insured partner, the company receives the policy’s death benefit and distributes its proceeds ______.
among the remaining partners, based on their share of ownership in the company
As with a partnership cross-purchase plan, when only a few shareholders exist, a corporate cross-purchase plan is ______.
purchased by each shareholder on the lives of the other shareholders
As with a partnership entity plan, when several shareholders exist, an entity plan is purchased by the corporation on each shareholder. The amount of each policy is equal to ______. Upon the death of a shareholder, his or her share is distributed to remaining shareholders, based on their ownership share in the corporation.
each share in the corporation
