Question

Select the most appropriate answer from the alternatives given below :

M.N.S. are partners in a firm having joint life policy of Rs 10,00,000 on which premium has been paid by a firm. M dies and his legal representatives want the whole amount of the policy where as N & S want to distribute the amount among all the partners.

Options

• M’s representatives and correct

• N & S are correct

• All are wrong

• Insurance company will decide

Answer 1

N & S are correct

Explanation: Joint life policy is an insurance policy taken by the firm on the joint lives of all the partners; so, it is an asset of the firm. Therefore, every partner, including the deceased partner, has as much right on it as the other partners. Also, in this case, the premium expense is paid by the firm. Hence, N and S are correct and the amount received from the policy must be distributed amongst all the partners in their old profit sharing ratio.