Primerica Life Producer Exam Practice Test 2025 – Complete Prep Resource

In the context of business life insurance policies, the premiums paid by the employer are generally tax-deductible. This tax deduction is permitted because these premiums are considered a business expense, which can reduce the taxable income of the business. The rationale behind this is that life insurance can be critical for protecting the business’s financial interests, particularly when key employees or partners are insured.

When the employer pays premiums for life insurance on an employee, particularly if the business is a corporation, those premiums can be deducted as a business expense, assuming the policy is not structured to provide a benefit to the employer in the event of the employee's death. Instead, such policies are often structured to provide benefits that may be used to cover debts, salaries, and other operational expenses that arise in the event of an employee's death. This allows the business to maintain continuity and protect its financial stability.

While it can depend on specific circumstances and the accounting methods used, typically, as long as the employee or their beneficiaries do not end up directly profiting from the policy, the premiums are indeed tax-deductible to the employer, making this the correct understanding of the situation.