chapter 5

Question 1

Key Employee Policy

Answer 1

If a key employee leaves a company and dies while the policy is in force, the proceeds are paid to the company.

Question 2

buy and sell agreement

Answer 2

business partners enter into a Buy and Sell Agreement, ensuring business continuity if a partner dies

Question 3

life settlements

Answer 3

transfer of ownership and change of beneficiary

Question 4

group term conversion period

Answer 4

if death occurs during the conversion period, the death benefit must be paid.

Question 5

contributory

Answer 5

a group insurance where employees share the cost

Question 6

contributory plans

Answer 6

75 percent of employees

Question 7

Individual Retirement Account (IRA)

Answer 7

retirement plan established by an employee

Question 8

Taxation of Group Term Life Insurance:

Answer 8

Death benefits from group term life insurance plans are generally income tax-free

Question 9

• Tax Deductibility of Personal Life Insurance Premiums

Answer 9

it is NOT tax deductable

Question 10

Modified Endowment Contract (MEC)

Answer 10

A policy becomes a MEC if too much premium is paid in the initial policy year