Advisor Today - September 2008

vors key employees in either eligibility or benefits.

In addition, the value of the full amount of coverage for key employees, minus their own contributions, is considered taxable income, based on the greater of actual or Table I costs.

UNIFORM PREMIUM TABLE I

Age Cost per month
per $1,000
of coverage

Avoid confusion

Confusion sometimes arises when discussing the employer’s tax deduction. The employer’s tax deduction is not limited to the costs associated with the first $50,000 in coverage. In addition, the deductible amount is not equal to the Table I costs. Instead, the employer generally may take a tax deduction equal to its share of the premium.

Thus, for Tina, Dewey, Cheetham and

24 and under

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70 and over

.05

.06

.08

.09

. 10

. 15

. 23

. 43

. 66

1. 27

2.06

under a group term insurance contract do not result in any taxable income to the beneficiary if they are paid in a lump sum. If the proceeds are payable in installments over more than one taxable year, only the interest earnings attributable to the proceeds are included in the beneficiary’s income for tax purposes.

There are other details to learn, such as the tax treatment of supplementary life insurance coverage. But the basic tax principles are outlined above. A deeper knowledge of how they work will help you answer your prospects’ questions about group term life insurance.