Type of Life Insurance Flashcards
1
Q
Term Life
A
Max benefit per premium $ spent
Can convert to permanent policy w/o proving insurability
2
Q
Universal Life
A
(Has Flexibility)
• Insured can adjust:
- Premiums, Face Value, Cash Value
• Insured does NOT direct investment portion
• Cash value can be used to pay premiums
3
Q
Whole Life
A
- Good for lifetime needs such as retirement funding, income, estate tax
- Can be participating or non-participating
4
Q
Participating means…
A
Receiving Dividends
5
Q
Participating Dividend Options
A
CRAPO
Cash
Reduce future premiums
Accumulate at interest
Paid-up permanent additions
One-year term insurance additions
6
Q
Key Person LI
A
- Premiums are NOT deductible business expense
- Proceeds are tax free
- Used to buy LI on key person in company
7
Q
Cross Purchase Buy/Sell (Pros and Cons)
A
Pros: Increases surviving partner’s basis
Cons: Lots of policies, cost variances N*(N-1)
8
Q
Entity Purchase Buy/Sell (Pros & Cons)
A
Pros: Company pays, Less policies
Cons: Does NOT increase surviving partner’s basis
