Life & Health Insurance Practice Exam 2025 - Free Practice Questions and Study Guide.

When long-term care (LTC) premiums are paid by an employer, they are typically considered deductible as business expenses. This reflects the tax treatment that allows companies to deduct legitimate business costs from their taxable income, reducing the overall tax burden. Employers can treat these premiums as an ordinary and necessary business expense, thus encouraging businesses to offer LTC coverage as part of their employee benefits package.

This approach not only provides tax advantages for the employer but also enhances employee benefits at potentially no direct cost to the employees, helping to make long-term care insurance more accessible.

In contrast, premiums paid by the employer are not considered income for the employee, which would imply additional taxation on the employee’s part; likewise, they are not inherently non-deductible as these expenses can qualify as deductibles under certain conditions. Additionally, LTC premiums are not taxed at a flat rate, as taxation typically varies based on the overall income and deductions of both the employer and the employee.