Primerica Life Producer Practice Test

Which scenario allows premiums to be tax deductible?

1. Premiums paid by the insured on an individual policy

2. Premiums paid by an employer on a $30,000 group life term insurance plan for employees

3. Premiums on a whole life insurance policy

4. Premiums for a dependent's term life insurance

The correct answer is: Premiums paid by an employer on a $30,000 group life term insurance plan for employees

The scenario where premiums are tax deductible involves premiums paid by an employer for a group life insurance plan. When employers pay for life insurance coverage on behalf of their employees, these premiums are generally considered a business expense. As such, they can be deducted from the employer's taxable income, reducing the overall tax liability. This is particularly the case when the coverage is up to $50,000 in face value, making it an attractive employee benefit. It's important to note that while the employer can deduct these premiums, the employee typically does not incur any taxable income for the coverage, meaning the benefit remains tax-efficient for both parties. In contrast, premiums paid by an insured individual on personal or dependent life insurance policies are usually not tax-deductible. Personal life insurance premiums, whether for whole life or term insurance, are borne by the policyholder and are considered personal expenses, thus not qualifying for tax deductions.