Uses Of Life Insurance

Question 1

Agreements that provide upon a business owners death, surviving owners will purchase the deceased interest, often with funds from life insurance policies owned by each principal on the lives of all the other principals

Answer 1

Cross-Purchase Plans

Question 2

Agreements in which a business assumes the obligations of purchasing the deceased owners interest in the business, thereby proportionately increasing the interest of the surviving owners

Answer 2

Entity Plans

Question 3

Individuals economic worth, measured by the sum of the individuals future earnings devoted to the individuals family

Answer 3

Human Life Value Approach

Question 4

Method for determining how much insurance protection a person should have by analyzing a family’s or businesses needs and objective of the insured were to die, become disabled, or retire

Answer 4

Human Needs Approach

Question 5

Protects a business against financial loss caused by the death or disability of a vital member of the company, usually individuals possessing managerial or technical skills or expertise

Answer 5

Key Person Insurance

Question 6

Describes the ethical duty of a producer to sell a product that fits the prospects needs rather than the producers needs.

Answer 6

Needs-Based Selling

Question 7

Arrangements between two parties where life insurance is written in one party’s life who names the beneficiary of the net death benefits (death benefit less cash value). The other party is assigned the cash value, while both share the premium payments

Answer 7

Split-Dollar Plan