Pennsylvania Life and Health Insurance Exam Practice Question
Which provides for the continuation of a business if the owner dies prematurely?
Correct Answer: B
Rationale: Buy-sell funding ensures that a business can continue operating smoothly in the event of an owner's premature death by facilitating the transfer of ownership to remaining partners or stakeholders. This arrangement provides financial resources to buy out the deceased owner's share, thus preventing disruptions.
Key employee life insurance (A) protects against the loss of vital employees but does not directly address ownership transfer. Executive bonuses (C) and deferred compensation (D) are incentive structures that do not provide mechanisms for business continuity after an owner's death.
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