Question

Dale and Ernie are partners who own and operate Cluck'n Hut, a chain of fast food restaurants. Their partnership obtains insurance on the owners' lives. This is:

a. liability insurance.
b. casualty insurance.
c. key-person insurance.
d. fidelity insurance.

Answer 1

The insurance obtained by Dale and Ernie for Cluck'n Hut is key-person insurance, which protects the business in case of the loss of an integral individual, not liability, casualty, or fidelity insurance. A limited liability partnership protects personal assets from business liabilities.

Step-by-step explanation:

The insurance obtained by Dale and Ernie for their partnership in Cluck'n Hut is designed to protect the business in the event of the loss of a key individual who is integral to the operation and success of the business. This type of insurance is known as key-person insurance. It is not liability insurance, which covers legal liabilities to third parties, nor is it casualty insurance, which typically covers losses due to accidents or unforeseen events, or fidelity insurance, which protects a business from losses due to fraudulent acts. A limited liability partnership like Cluck'n Hut provides the benefit of limiting the partners' liability to their investment in the company, thereby protecting personal assets in the event of business failure.