Tennessee Insurance Practice Exam

The premiums paid by an employer for an employee's group life insurance are generally considered to be?

1. Tax-exempt for the employee

2. Tax-deductible to the employer

3. Non-deductible expenses

4. Taxable income for the employee

The correct answer is: Tax-deductible to the employer

The premiums paid by an employer for an employee's group life insurance are generally considered tax-deductible to the employer. This means that when employers provide group life insurance coverage for their employees and pay the premiums for that coverage, they can deduct those expenses from their taxable income. This tax treatment serves as an incentive for employers to offer group life insurance as part of their employee benefits package, making it a financially viable option for businesses. When employers incur these expenses, they are recognized as ordinary and necessary business expenses, which are eligible for deduction under the Internal Revenue Code. This not only benefits the employer by reducing their taxable income but can also enhance employee morale and satisfaction by providing them with valuable insurance coverage without direct cost to them, further supporting overall workforce welfare. The other options do not accurately reflect how group life insurance premiums are treated from a tax perspective.