Question 75

The amount that an employer pays for accidental death and dismemberment insurance for its employees is normally deductible to the business.

Employers typically find that the premiums paid for accidental death and dismemberment insurance can be deducted as a business expense, which can provide financial benefits to the company.

A) deductible to the business

This option is correct because premiums paid for accidental death and dismemberment insurance are generally considered ordinary and necessary business expenses, and thus are deductible from taxable income.

B) included in taxable income for each covered employee

This option is incorrect as the premiums paid by the employer for accidental death and dismemberment insurance are not included in the taxable income of the employees. Instead, they are treated as a business expense for the employer.

C) recovered upon receipt of the insurance proceeds

This option is incorrect because the premiums paid for insurance are not directly recovered upon receiving insurance proceeds. The insurance proceeds are separate from the costs incurred to maintain the policy.

D) considered unnecessary as a business expense

This option is incorrect as well; while some businesses may view certain insurance policies as unnecessary, accidental death and dismemberment insurance is often considered a valuable benefit that can protect employees and their families, making it a relevant business expense.

Conclusion

The correct answer is definitively A because employers can deduct the premiums paid for accidental death and dismemberment insurance, thus reducing their taxable income. Options B, C, and D do not accurately reflect the nature of insurance premiums in relation to business expenses and tax treatment, underscoring the unique financial implications of such insurance policies for employers.