Answer :
In the context of the question provided, the business use of life insurance includes several specific purposes. Let's break down each option to determine which one does not fit:
1. Key-person life insurance: This type of insurance is taken out by a business on the life of a key employee. In the event of the employee's death, the company receives the insurance payout to help cover financial losses related to the individual's role within the business.
2. Funding cross-purchase agreements: Cross-purchase agreements involve business partners taking out life insurance policies on each other. In the event of a partner's death, the surviving partner(s) receive the insurance proceeds to buy out the deceased partner's share of the business.
3. Split-dollar plans: These plans involve an agreement between an employer and an employee to split the costs and benefits of a life insurance policy. The employer typically pays for a portion of the policy's premiums, and the employee's beneficiaries receive the death benefit.
4. Funding IRAs: Life insurance can also be used to fund Individual Retirement Accounts (IRAs). This can provide a tax-advantaged way to save for retirement and ensure financial security for employees or business owners.
Among the options provided, the business use of life insurance that does not fit is funding IRAs. While life insurance can be used for various business purposes like key-person coverage and funding buy-sell agreements, using life insurance to fund IRAs is typically more relevant to personal financial planning rather than direct business needs.
