Illinois Health Insurance Practice Exam

How are group disability income policy premiums usually treated in terms of taxes?

1. Cannot be deducted

2. Partially tax deductible

3. Fully tax deductible

4. Can be tax deducted by the employer; benefits subject to tax

The correct answer is: Can be tax deducted by the employer; benefits subject to tax

Group disability income policy premiums are typically tax-deductible for the employer. This means that the employer can generally deduct the cost of providing group disability insurance coverage for its employees as a business expense. However, the benefits received by employees under the policy are usually subject to income tax. This is why option D, "Can be tax deducted by the employer; benefits subject to tax," is the correct answer. On the other hand, options A, B, and C are not accurate in the context of group disability income policy premiums. Group disability income policy premiums are usually a tax-deductible expense for the employer, and the benefits are typically taxable income for the employees receiving them.