Insurance for Corporations

KNOWLEDGE EXPECTED OF: CFP® Professionals

Highest Knowledge Level: Understanding

Knowledge Levels and Associated Verbs


Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
Define
To state exactly the meaning of
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
Compare
To note the similarities and differences between two or more things
Estimate
To determine an approximate value for
Calculate
To find the value using mathematics
Convert
To change from one form or purpose to another
Evaluate
To reach a conclusion or make a through careful study
Interpret
To give the meaning of / to construe or understand / to translate orally

Hold cursor over or click on each term to read its definition.

  • Identify the types of insurance that may be owned by a business, such as:
    • Life insurance
    • Disability insurance
    • Critical illness insurance
    • Business interruption insurance (i.e., overhead insurance)
  • Explain advantages and disadvantages of corporate-owned insurance.
  • Explain how the proceeds of corporate-owned life insurance may be used by a business.
    • To pay expenses
    • To pay debts
    • To pay costs related to replacing key person (i.e., talent acquisition, training, remuneration)
    • Establish reserve to offset drop in revenues
    • To pay tax-free dividend to shareholders
    • To redeem shares upon the death of a shareholder
  • Explain the tax treatment of corporate-owned life and disability insurance.
    • When premiums are paid by the business
    • When premiums are paid by the individual
    • When benefits are received by the business
    • When benefits are received by the individual’s estate or their beneficiary
  • Explain who may qualify as a key person to a business. 
  • Identify the purpose for which key person insurance may be used.
    • Key person life insurance
    • Key person disability insurance
  • Explain how insurance may be used to fund a buy-sell agreement. 
  • Identify the concept of a split dollar insurance policy.