Life Insurance FundamentalsQuestion 136 of 716
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.Cross-purchase buy-sell plan
b.Group survivor income plan
c.Key person indemnity plan
d.Corporate redemption 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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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)