Accident and Sickness Insurance Mock Exam 1 questions with correct answers

Rhonda and Karl are equal partners of an accounting business. Their business is currently worth $3,000,000, and their annual business expenses are $240,000. They share the business expenses equally. The couple wants to have a buy-sell agreement in place in the event that one of them is disabled for more than one year. Rhonda and Karl also state that they are each responsible for 50% of their clients. If one of them were to become disabled, the clients would move over to another accounting business. This would lead to a loss of revenue as the business is totally dependent on their expertise in accounting to generate revenue. Which of the following recommendations best meets the couple's needs? a) Purchase a $3,000,000 disability buyout policy on each of their lives and a business overhead expense policy of $10,000 per month on each of them b) Purchase a $3,000,000 disability buyout policy on each of their lives and a business overhead expense policy of $20,000 per month on each of them c) Purchase a $1,500,000 disability buyout policy on each of their lives and a business overhead expense policy of $10,000 per month on each of them d) Purchase a disability insurance policy on each of their lives Answer (corrct) Purchase a $1,500,000 disability buyout policy on each of their lives and a business overhead expense policy of $10,000 per month on each of them Rationale: