Life Insurance FundamentalsQuestion 136 of 315
Two business partners want to make sure that when one dies, the surviving partner can buy out the deceased's share and the family receives cash. Each partner owns a life policy on the OTHER partner. This is a:
a.Key person plan
b.Group survivorship plan
c.Entity buy-sell plan
d.Cross-purchase buy-sell plan
Explanation
Under a cross-purchase plan, each partner personally owns and pays for a policy on every other partner. At death, the surviving partner uses the proceeds to buy out the deceased's interest, giving the family cash.
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