Arkansas Life and Health Insurance Practice Exam

In which of the following circumstances was the small business owner able to deduct the premiums they paid for insurance?

1. An individual buying a personal accident policy

2. A sole proprietor of a small firm buying an overhead expense policy

3. An employee contributing to an employer's group life insurance plan

4. A partner buying a key person insurance policy

The correct answer is: An individual buying a personal accident policy

The small business owner was able to deduct the premiums they paid for insurance when buying a personal accident policy. This is because personal accident policies are typically considered personal insurance and are therefore tax-deductible for the business owner. In contrast, the other options involve insurance policies that are more business-related or involve contributions to employer plans, which may not be eligible for tax deductions in the same way that personal accident policies are.