Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
Life insurance within a qualified retirement plan is generally:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Qualified retirement plans may fund life insurance only as an incidental benefit — the death protection must remain secondary to the plan's retirement purpose. Commonly this is tested by the 25%/100% incidental benefit rules, which limit how much of the plan's funds may be used for pre-retirement death coverage. These limits keep the plan primarily a retirement vehicle while still allowing a modest death benefit, balancing the tax advantages of both.
Why the other options are wrong
- B) The incidental benefit limits cap the amount of insurance a plan may hold; it is not unlimited.
- C) Life insurance is permitted inside qualified plans, but only as an incidental benefit.
- D) Coverage is available to plan participants generally, not restricted to trustees.
Memory hook
Life insurance in a qualified plan is a garnish, not the main dish — incidental only.