Chapter 10 Life Flashcards
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?
Company X
Which statement regarding third-party ownership of a life insurance policy is true?
Beneficiary is required to be irrevocable
Policy cannot be assigned once issued
It is illegal in most states
It is used extensively in estate-planning as well as business circumstances
It is used extensively in estate-planning as well as business circumstances. Third-party ownership of a life insurance policy is widely used in business settings and estate-planning situations.
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?
Each partner must own a policy on the other partners
Which statement regarding a Key Employee Life policy is NOT true?
The application must be signed by the key employee
Its purpose is to prevent the financial loss that may ensue if a key employee dies
The beneficiary is named by the key employee
The company purchases, owns, pays the premiums and is the beneficiary
The beneficiary is named by the key employee
An engineering firm that would suffer financially from the death of a project manager should purchase a
Key Person Life Policy
A Loss-Purchase Buy and Sell agreement among three partners, funded with individual life insurance, would require how many policies?
- 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.
