Life Insurance FAQ

What is a Pre-Deduction Life Insurance Policy? 2021 Update

Pre-Deduction Life Insurance Policy
Pre-Deduction Life Insurance Policy

What is a Pre-Deduction Life Insurance Policy?

The first thing to know is that a pre-deduction life insurance policy may not cover your funeral expenses or burial expenses.

That being said, 

Pre-tax deductions are payments proceeding interests that are given straight from an employee’s paycheck before withholding salary for taxes.

There are two kinds of benefits deductions:

  • Post-tax deductions
  • Pre-tax deductions

Pre-tax deductions diminish the employee’s taxable income, which can save them cash when arranging their federal income tax return.

Furthermore, according to the IRS, certain profits are eligible for pre-tax deductions.

And for small businesses, a pre-tax deductions policy can also decrease the tax duty of the employer.

You may also need to apply for a pre-deduction policy in cases where you’re eligible for a life insurance policy, but your policy is cancelled.

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