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 are deductible business expenses, which can reduce their taxable income.

A) deductible to the business

This option is correct because premiums for accidental death and dismemberment insurance are generally considered a valid business expense. Businesses can deduct these costs on their tax returns, which can provide financial relief and incentivize employers to offer such benefits to their employees.

B) included in taxable income for each covered employee

This option is incorrect as the premiums paid by employers for accidental death and dismemberment insurance are not included in the taxable income of employees. Instead, these payments are considered fringe benefits that do not increase the taxable income of the employee.

C) recovered upon receipt of the insurance proceeds

This option is incorrect because the employer does not recover the premiums paid for the insurance from the insurance proceeds. The proceeds are paid out to the beneficiaries in the event of a claim, and the premiums are considered an expense incurred by the employer.

D) considered unnecessary as a business expense

This option is also incorrect. Many employers view accidental death and dismemberment insurance as a valuable benefit that enhances employee welfare and safety, making it a relevant business expense rather than an unnecessary one.

Conclusion

The correct answer is A, as the premiums for accidental death and dismemberment insurance are deductible expenses for businesses, aiding in tax reduction. All other options fail to accurately describe the treatment of these insurance premiums in the context of business expenses and employee taxation.