Question

At the time of retirement of a partner, firm gets _________ from the insurance company against the Joint Life Policy taken by the firm.

• A. Policy Amount
• B. Surrender Value of the Retiring partner
• C. Policy Value for the retiring partner and Surrender Value for the rest
• D. Surrender Value for all the partners

Answer 1

Answer: (D)

Surrender Value for all the partners

A partnership firm may decide to take a joint life insurance policy on the lives of all the partners. The firm pays the premium and the amount of policy is payable to the firm on the death or maturity of the policy, whichever is earlier in case of retirement. The objective is to minimize financial hardships during the payment of a large sum of capital on the retirement of a partner.

In case of a retirement, the firm receives surrender value of policy for all partners.