Question

All of these are legitimate uses of insurance in a business setting EXCEPT?

A) Funding against financial loss by the death of a key employee.
B) Funding business continuation agreements.
C) Funding against general company financial loss.
D) Funding a buy-sell plan.

Answer 1

The correct answer is C) Funding against general company financial loss. All of the other options listed are legitimate uses of insurance in a business setting.

Step-by-step explanation:

The correct answer is C) Funding against general company financial loss. All of the other options listed are legitimate uses of insurance in a business setting. Let's go through each option:

1. A) Funding against financial loss by the death of a key employee: This is a common use of insurance in a business setting. If a key employee were to pass away, the insurance policy would provide funds to help the company cope with the financial loss.
2. B) Funding business continuation agreements: Insurance can be used to fund agreements that ensure the continuity of a business in the event of certain circumstances, such as the death or disability of a key employee.
3. C) Funding against general company financial loss: This statement is incorrect because insurance is actually used to mitigate the risk of financial loss. Insurance policies are designed to provide coverage for specific risks that a company may face, such as property damage, liability claims, or employee injuries.
4. D) Funding a buy-sell plan: Insurance can be used to fund a buy-sell plan, which outlines what will happen to the business in the event that one of the owners wants to sell their share or is forced to do so due to death or disability.

So, option C is the exception as it does not represent a legitimate use of insurance in a business setting.