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Life Insurance Basics

Zayne Williams avatar Zayne Williams
25 November 2022
4.6 (206 reviews)
18 test answers

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question
All of the following are true of key person insurance EXCEPT
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The plan is funded by permanent insurance only; key person coverage may be funded by ANY type of life insurance.
question
Which of the following would LEAST likely be considered a legitimate need that would be paid by insurance proceeds?
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Vacation travel expenses.
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Which of the following is true regarding the Needs Approach method of determining the value of an individual's life?
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It must be assumed that the death of the insured will occur immediately, coverage is based on the predicted needs of that family, and the death of an insured must be premature.
question
When does policy coverage become effective?
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As of the application date.
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Is Workers Compensation an example of business use of life insurance?
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No, it is a benefit payable when a worker in injured by a work-related injury.
question
A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then
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The benefit is received tax free.
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All of the following are business uses of life insurance
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Funding against key employee death, funding business continuation agreements, compensating executives
question
What is a buy-sell agreement?
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A legal contract that determines what will be done in a business in case an owners dies/becomes disabled; AKA a business continuation agreement.
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What is the purpose of a conditional receipt?
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It is intended to provide coverage on a date earlier than the date of issuance of the policy
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What are personal uses of life insurance?
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Cash accumulation, survivor protection, and estate creation.
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Who takes responsibility of advertisements?
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The insurer.
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Who provides an underwriter with info concerning an applicant's health history?
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The Medical Information Bureau.
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How are premiums taxed in a key-person life insurance policy?
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Premiums are not tax deductible as a business expense.
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What does backdating policies do?
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Lower the insured's premium.
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How far can policy applications be back dated?
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6 months.
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What happens to interest earned on investments on premiums?
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It is used to lower premiums.
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What is the MIB (Medical Information Bureau)?
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A nonprofit organization that maintains underwriting info on applicants for life/health insurance.
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Another name for a substandard risk classification is...
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