PSI Ohio Insurance Practice Exam

In a group disability insurance plan, which can be tax-deductible for the company?

1. The benefits given to employees

2. The insurance premiums paid by the company

3. The administrative costs for managing the plan

4. The income employees receive while disabled

The correct answer is: The insurance premiums paid by the company

In the context of group disability insurance plans, the premiums paid by the company are typically tax-deductible as a business expense. This means that when the company pays the premiums for group disability insurance, they can deduct those costs from their taxable income, reducing their overall tax liability. This tax treatment is designed to incentivize employers to provide valuable benefits to their employees, such as disability insurance coverage, which helps to safeguard employees' financial well-being in the event they become unable to work due to illness or injury. The deductibility of premiums is grounded in tax laws that recognize employee benefits, like insurance, as valid business expenses that can benefit both the employer and the employees. Therefore, when considering the financial implications of offering such benefits, the ability to deduct these premiums is an important advantage for the company.