BUSINESS USES OF LIFE INSURANCE Flashcards
who would be considered a key employee?
a person who provides a unique and very important position within the company
T or F: in key employee contracts, the insurable interest exists between the key employee and the employer
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)
T or F: 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.
T or F: A deferred compensation plan may also be called a qualified retirement plan
false - a deferred compesation plan is also referred to as a nonqualified retirement plan
true or false: ley employee policy premiums are not deductible to the business, but the death benefits is tax-freed
true
what is a cross purchase plan?
a buy sell agreement where each partner buys life insurance on all remaining partners
what is the purpose of a key employee policy?
to reimburse the business in the event a key employee dies or becomes disabled
what policy provides for the orderly continuation of a business in the event of a partner’s death
buy/sell agreement
a key employee policy protects the ___, not the ___.
a key employee protects the employer, not the employee
the lawful exhange of two values in an insurance transaction is referred to as ____
consideration
T or F: 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
name the agreement where an entity agrees to purchase a deceased owner’s portion of a business
the entity agreement
____ is used to fund a buy/sell agreement.
life insurance
