California Life and Health Insurance Practice Exam 2025 – Your All-in-One Guide to Exam Success!

The correct answer is $50,000. Under federal tax law, the first $50,000 of employer-provided group term life insurance is generally exempt from income taxation for the employee. This means that employees do not need to report this amount as income on their tax returns, allowing them to receive this benefit without incurring additional tax liability.

When the amount of employer-provided group term life insurance exceeds $50,000, the excess becomes subject to income taxation. The Internal Revenue Service (IRS) has established this threshold to allow employees a certain level of life insurance coverage without taxing them on the benefit, which encourages employers to offer such plans.

Understanding the tax implications of employer-provided life insurance is essential for both employees and employers, as it impacts financial planning and compensation strategies. The other amounts listed exceed the tax-exempt limit, and therefore would require the employee to count any benefit received above $50,000 as taxable income.