Chapter 10 Flashcards
Who would be considered a key employee?
A person who provides a unique and very important position within the company
What is the purpose of a Key Employee Policy?
To reimburse the business in the event a key employee does or becomes disabled
T/F: A deferred compensation plan may also be called a Qualified retirement plan
F; it’s nonqualified
Name the agreement where an entity agrees to purchase a deceased owners portion or a business.
The entity agreement
What is a cross purchase plan?
A buy/sell agreement where each partner buys life insurance on all remaining partners
A key employee policy protects the _________, not the ____________.
Employer; employee
T/F: Key employee policy premiums are not deductible to the business, but the death benefit is tax free.
T
What policy provides for the orderly continuation of a business in the event of a partners death?
Buy sell agreement
An entity with seven partners agrees to purchase an entity buy sell agreement. How many total policies will be needed?
- One for each partner
The lawful exchange of two values in an insurance transaction is referred to as ___________.
Consideration
T/F: In Key Employee contracts, the insurable interest exists between the key employee and the employer.
T
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
_____________ is used to fund a buy sell agreement.
Life insurance
T/F: Entity buy sell agreement proceeds are paid to the entity to buy the deceased owners business portion.
T
