Advanced Underwriting Consultants

Question of the Day – May 1

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  Can the owner of a life policy with a chronic illness rider benefit take a tax deduction for any part of the premium?

Answer:  Probably not.

Most modern chronic illness rider benefits are structured so that the policy owner accesses the death benefit early if the insured meets the statutory definition of chronic illness.  The definition of chronic illness in Code Section 101 mirrors the definition of qualified long term care coverage contained in Code Section 7702B.

While the premium for qualified individual long term care insurance is potentially tax deductible as a medical expense under Code Section 213, premiums for life insurance are explicitly not income tax deductible under Code Section 264.  Since most chronic illness rider designs integrate the life policy chronic illness benefit into the life death benefit, Section 264 should trump Section 213.  That makes the premium non-deductible.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.