LLQP Life Insurance · Component 2.1 · 30% of the exam
An employer pays the premium for its employees' group life coverage. For the employees this premium is:
- Areceived entirely free of tax because the coverage protects the employee's family
- Bdeductible from each employee's own income in the year that it is paid
- a taxable benefit included in the employee's income
- Dtaxable only for employees whose coverage exceeds the plan's non-evidence maximum
Correct answer: C) a taxable benefit included in the employee's income
Employer-paid life premiums are a taxable benefit to the employee, while the death benefit itself remains tax-free to the beneficiary. Where the employee pays, there is no benefit to report and no deduction either.
Why the other options are wrong
- AThe premium is a benefit even though the coverage protects the family.
- BLife insurance premiums are not deductible to an individual.
- DThe benefit arises on employer-paid coverage regardless of the amount.
Exam tip
Employer-paid life premium equals a taxable benefit; the death benefit stays tax-free.
Common mistake
Assuming employer-paid coverage costs the employee nothing at all.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.