Business Uses of Life Insurance Flashcards
True or False: A deferred compensation plan may also be called a qualified retirement plan.
False.
A deferred compensation plan is also referred to as a nonqualified retirement plan.
The lawful exchange of two values in an insurance transaction is referred to as _____________.
consideration.
True or False: Key employee policy premiums are not deductible to the business, but the death benefit is tax-free.
True
Nine partners are purchasing a cross-purchase buy/sell agreement. How many total policies are needed for this to occur?
- Each partner must buy 8 policies (9 x 8).
What is a cross-purchase plan?
A buy/sell agreement where each partner buys life insurance on all remaining partners
True or False: Entity buy/sell agreement proceeds are paid to the entity to buy the deceased owner’s business portion.
True
An entity with seven partners agrees to purchase an entity buy/sell agreement. How many total policies will be needed?
- One for each partner.
A key employee policy protects the __________, not the __________
employer, not the employee.
Name the agreement where an entity agrees to purchase a deceased owner’s portion of a business.
The entity agreement
True or False: In Key Employee contracts, the insurable interest exists between the key employee and the employer.
True
_________________ is used to fund a buy/sell agreement.
Life insurance
What policy provides for the orderly continuation of a business in the event of a partner’s death?
Buy/Sell Agreement
What is the purpose of a Key Employee policy?
To reimburse the business in the event a key employee dies or becomes disabled
Who would be considered a key employee?
A person who provides a unique and very important position within the company
