Business Disability Insurance (ID A/H/S)

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Question 1 of 6

1. Question

Pedro is a very valuable employee of a high tech company. Pedro’s employer has purchased an insurance policy that will pay a benefit to the employer if Pedro becomes injured or ill and unable to work. This type of insurance is described as what?

Key employee disability income

Disability buy-sell

Business overhead expense (BOE)

Workers compensation

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Question 2 of 6

2. Question

Which of the following statements is NOT true about key employee disability income insurance?

The key employee is the insured.

The key employee is the policyowner and pays the premium.

The business (employer) is the beneficiary of the policy.

The business (employer) does not receive a tax deduction for the premiums paid; benefits received by the business are not taxable income.

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Question 3 of 6

3. Question

Which of the following is a legal contract between the owners of a business, specifying what will happen if one of the owners dies or becomes disabled and unable to work?

Buy-sell agreement

Key employee agreement

Business overhead agreement

Residual disability agreement

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Question 4 of 6

4. Question

What is the main purpose of a buy-sell agreement?

To allow an insurance company to provide customers with evidence that the insurer has obtained a certificate of authority from the state insurance department to sell disability insurance

To allow the remaining owner(s) of the business to purchase the portion of the business owned by the person who is no longer able to continue in the business

To help protect a business against financial loss if an important (key) employee becomes injured or ill and unable to work

To define the length of time (such as 30, 60, or 90 days) that the insured must wait after he or she has become disabled, before becoming eligible for benefits under the policy.

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Question 5 of 6

5. Question

Business overhead expense (BOE) insurance does NOT pay for what?

Employee salaries

Office rent and utilities

Disabled owner's salary

Office expenses

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Question 6 of 6

6. Question

Which of the following statements is NOT true about business overhead expense (BOE) insurance?

It can pay for business expenses incurred during the disability. This allows the business to “keep the lights on” and stay in business while the owner is disabled.

It can pay for the disabled owner’s salary.

It can pay for expenses such as office rent, utilities, accounting, legal, and other professional fees.

These policies pay the actual amount of covered expenses—up to the monthly policy benefit limit.

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Business Disability Insurance (ID A/H/S)

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