Chapter 11: Uses of Life insurance Flashcards
Which statement regarding third party ownership of a life insurance policy is true
it is used extensively in estate planning as well as business circumstances
What is considered a valid reason for a small business to insure the lives of its major shareholders?
fund a buy-sell agreement
An architecture firm would stand to lose money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager
key person insurance
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
if both parents were to die, it would provide death benefits to the child
K is insured under a life insurance policy owned by a third party. Which of these statements is TRUE
K has no ownership rights
Which of these is NOT considered to be a cost connected with an individuals death?
business expense
Which of these is NOT a reason for a business to buy key person insurance
a pension deficiency if the key employee dies
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?
split dollar plan
In a key employee life insurance policy, the third party owner can be all of the following, EXCEPT:
insured
Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a buy-sell agreement, which of the following is true?
each partner owns a $500,000 policy on their partners life
