LLQP Life Insurance · Component 1.2 · 35% of the exam
A client's employer pays the premiums for her group life coverage. How is this treated for her income tax?
- Employer-paid group life premiums are a taxable benefit to the employee, while the death benefit remains tax-free
- BBoth the premiums and the death benefit are taxable, since the employer rather than the employee paid for the coverage
- CThe premiums are a non-taxable benefit, in the same way as employer-paid health and dental premiums
- DShe may deduct the premiums from her income, since they are paid on her behalf as part of her employment
Correct answer: A) Employer-paid group life premiums are a taxable benefit to the employee, while the death benefit remains tax-free
Unlike employer-paid health and dental premiums, employer-paid group life insurance premiums are a taxable benefit reported on the employee's T4. The death benefit paid to her beneficiary is still tax-free.
Why the other options are wrong
- BThe death benefit is not taxable; only the premium is a taxable benefit.
- CEmployer-paid group life premiums are a taxable benefit, unlike health and dental.
- DEmployees cannot deduct group life premiums.
Exam tip
Employer-paid life premiums are taxable to the employee; employer-paid health and dental premiums are not (outside Quebec). Distinguish the two.
Common mistake
Confusing the tax treatment of group life premiums with that of group health premiums.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Life Insurance module. Written against the published curriculum.
More from component 1
- A client's existing policies were all sold by another agent who has left the business. The reviewing agent should:
- A client supports an adult child with a permanent disability who will never be self-sufficient. In the needs analysis this is:
- A self-employed client's income fluctuates widely year to year. When determining the income to replace, the agent should:
- A 58-year-old client plans to retire at 65 and has a pension that will pay a survivor benefit. How does time to retirement affect the life insurance need?
- Which of the following is a capital expense arising at death, rather than an ongoing income need?
- A client is the sole income earner in a household with a stay-at-home spouse and two young children. The greatest risk that life insurance on the client addresses is:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.