XCEL USES OF LIFE INSURANCE EXAM
PREP QUESTIONS AND ANSWERS GRADED
A PLUS STUDY RESOURCE
●● In a Key Employee life insurance policy, the third-party owner can
be all the following, EXCEPT:
Answer: insured
●● 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: establish the needs of the individual and his dependents
●● In life insurance, the needs approach is used mostly to establish:
Answer: how much life insurance a client should apply for
●● Company Z has a Cross Purchase Buy-Sell Agreement in a 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
●● Which of these is NOT a reason for purchasing life insurance on the
life of a minor?
,Answer: if both parents were to die, it would provide death benefits to
the child
●● 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
●● Which of these factors does NOT influence an applicant's need for
life insurance?
Answer: self-maintenance expenses
●● Which statement regarding a Key Employee Life policy is NOT
true?
Answer: the beneficiary is named by the key employee
●● Which of these is NOT a reason for a business to buy key person life
insurance?
Answer: a pension deficiency if the key employee dies
●● 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
●● A Loss-Purchase Buy and Sell agreement among three partners,
funded with individual life insurance, would require how many policies?
Answer: 6
●● What is considered a valid reason for small businesses to insure the
lives of its major shareholders?
Answer: fund a buy-sell agreement
●● The premiums paid by an employer for his employee's group life
insurance are usually considered to be:
Answer: tax-deductible to the employer
●● 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
●● 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?
PREP QUESTIONS AND ANSWERS GRADED
A PLUS STUDY RESOURCE
●● In a Key Employee life insurance policy, the third-party owner can
be all the following, EXCEPT:
Answer: insured
●● 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: establish the needs of the individual and his dependents
●● In life insurance, the needs approach is used mostly to establish:
Answer: how much life insurance a client should apply for
●● Company Z has a Cross Purchase Buy-Sell Agreement in a 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
●● Which of these is NOT a reason for purchasing life insurance on the
life of a minor?
,Answer: if both parents were to die, it would provide death benefits to
the child
●● 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
●● Which of these factors does NOT influence an applicant's need for
life insurance?
Answer: self-maintenance expenses
●● Which statement regarding a Key Employee Life policy is NOT
true?
Answer: the beneficiary is named by the key employee
●● Which of these is NOT a reason for a business to buy key person life
insurance?
Answer: a pension deficiency if the key employee dies
●● 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
●● A Loss-Purchase Buy and Sell agreement among three partners,
funded with individual life insurance, would require how many policies?
Answer: 6
●● What is considered a valid reason for small businesses to insure the
lives of its major shareholders?
Answer: fund a buy-sell agreement
●● The premiums paid by an employer for his employee's group life
insurance are usually considered to be:
Answer: tax-deductible to the employer
●● 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
●● 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?
