Insurance Concepts

Question 1

Are disability payments taxed and premiums deductible if the individual owns the contract and pays the premium?

Answer 1

If the individual owns the contract and pays the premium,
1. Premiums are not deductible. They are paid with after-tax dollars.
2. Benefits are tax-free to the individual.

Question 2

Are disability payments taxed and premiums deductible if the employee owns the contract and the employer pays the entire premium under a bonus arrangement (such as Section 162)?

Answer 2

If the employee owns the contract and the employer pays the entire premium under a BONUS ARRANGEMENT,
1. Premiums are deductible by the employer as a bonus. Employee recognizes premiums in income.
2. Benefits are tax-free to the employee.

Question 3

Are disability payments taxed and premiums deductible if the employee owns the contract and the employer pays the entire premium under a salary continuation plan (or group plan).

Answer 3

If the employee owns the contract and the employer pays the entire premium under a salary continuation (or group) plan,
1. Premiums are deductible by the employer as they are paid with pre-tax dollars.
2. Benefits are ENTIRELY TAXABLE to the employee.

Question 4

What are the types of nonforfeiture options?

Answer 4

1.

Question 5

What are the exceptions for transfer for value?

Answer 5

1. A sale or transfer to the insured.
2. A sale or transfer to a partner or a partnership in which the insured is a partner.
3. A sale or transfer to a corporation in which the insured is a shareholder or officer.
4. A transfer of property incident to a divorce.

Question 6

FSA Keys

Answer 6

1. No income tax, FICA, or FUTA
2. Cannot pay for any long term care expenses.
3. Not an HSA.
4. Use it or lose it by the end of the year.
5. Can pay for dependent care

Question 7

HSA Keys

Answer 7

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