Question

A business valued at 4000000 has 4 partners. Each partner purchases a life insurance policy to cover their individual interests. This is an example of which type of partnership insurance?

1) Buy-sell agreement
2) Cross-purchase plan
3) Key person plan
4) Not enough information provided

Answer 1

This is an example of a Cross-purchase plan partnership insurance, where each partner purchases a life insurance policy to cover their individual interests.

Step-by-step explanation:

This situation is an example of a Cross-purchase plan partnership insurance. In a cross-purchase plan, each partner purchases a life insurance policy to cover their individual interests.

With a cross-purchase plan, each partner is the owner and beneficiary of the life insurance policy on the other partners. In the event of a partner's death, the surviving partners can use the life insurance proceeds to purchase the deceased partner's share of the business.

In this case, each partner would purchase a life insurance policy to cover the value of their individual interest in the business, which is valued at $4,000,000.