Question

An individual is insured under his employer's group Disability Income policy. The insured suffered an accident while on vacation that left him unable to work for 4 months. If the disability income policy pays the benefit, which of the following would be true?

Answer 1

Answer:

benefits that are attributable to employer contributions are fully taxable to the employee as income

Explanation:

In this case, the employer is fully involved in the insurance and either pays part of the premium or all. Hence it can be said that the benefit from the insurance are part of the employers contribution to the employee. If the disability income policy pays the benefit, this means that since it is a contribution of the employer, then it has to be taxed in the same way that employee income is taxed.