Which of these factors does NOT influence an applicant's need for life insurance?
Lifestyle of the applicant
Number of dependents
Future educational costs of the dependents
Self-maintenance expenses
answer
An individual's need for a death benefit for survivors is influenced by all of the following factors EXCEPT self-maintenance expenses.
question
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?
answer
Split-dollar plan
A split-dollar plan is an arrangement where an employer and an employee share in the cost of purchasing a life insurance policy on the employee. The employee is also allowed to name the policy beneficiary.
question
C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true?
answer
ABC is the policyowner, C is the insured, and ABC is the beneficiary
question
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
answer
Fund a buy-sell agreement
Life insurance is purchased to fund a buy-sell agreement in the event of the death of a major shareholder in a business.
question
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?
answer
Each partner owns a $500,000 policy on their partner's life
The amount of the policy is equivalent to each partner's share of the business. When one partner dies, the other partner receives the death benefit from the life insurance on the deceased partner, which is then used to buy the deceased partner's ownership of the business.
question
Which statement regarding third-party ownership of a life insurance policy is true?
answer
It is used extensively in estate-planning as well as business circumstances
question
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
answer
Each partner must own a policy on the other partners
question
Which of these is NOT a reason for a business to buy key person life insurance?
*The reduction in sales as a direct result from death of the key employee
*A void in leadership if the key person were to die
*The loss of company revenues while a replacement is being sought
*A pension deficiency if the key employee dies
answer
The correct answer is "A pension deficiency if the key employee dies". All of these are reasons for a business organization to purchase key person life insurance EXCEPT "The increased pension liability resulting from the key person's death".
question
The premiums paid by an employer for his employee's group life insurance are usually considered to be
answer
tax-deductible to the employer
question
Which of these is NOT relevant when determining the amount of personal life insurance needed?
answer
Local unemployment rate
question
In life insurance, the needs approach is used mostly to establish
answer
how much life insurance a client should apply for
The "needs approach" in life insurance is most useful in determining the amount of life insurance to be recommended to a client.
question
Which statement regarding a Key Employee Life policy is NOT true?
answer
The beneficiary is named by the key employee
The company names the beneficiary, not the employee.
question
A Loss-Purchase Buy and Sell agreement among three partners, funded with individual life insurance, would require how many policies?
answer
The correct answer is "6". Each partner owns, is the beneficiary of and pays the premiums for life insurance on the other partners equal to his or her share of the purchase price.
question
A Key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed?
answer
Company X
With Key Person Insurance, the company purchases, owns, pays the premiums and is the beneficiary of the life insurance policy on the key person.
question
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
* Provides funds for final expenses if the child were to die
*Provides living benefits for the child's college education
*Provides child with insurance now, in case the child becomes uninsurable later
answer
If both parents were to die, it would provide death benefits to the child
An insurance policy on a child would not pay any benefits if one or both of the parents died. All of the other answers are valid reasons for buying life insurance on a child.
question
Which of these is NOT considered to be a cost connected with an individual's death?
*Funeral expense
*Tax liability
*Business expenses
*Probate costs
answer
Business expenses
All of these are considered to be costs associated with an individual's death EXCEPT business expenses.
question
When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?
answer
Establishes the needs of the individual and his dependents
Needs analysis is a method of life insurance planning which identifies the needs of an individual and the individual's dependents.
question
An engineering firm that would suffer financially from the death of a project manager should purchase a
answer
Key Person Life Policy
question
In a Key Employee life insurance policy, the third-party owner can be all of the following EXCEPT
*Applicant
*Owner
*Payor
*Insured
answer
Insured
In a Key Employee life insurance policy, the third-party owner can be all of these EXCEPT the insured.
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