What is an executive bonus in the context of life insurance?

An executive bonus in the context of life insurance refers to a wage increase that is equivalent to the premium of a new life insurance policy taken out on a key employee or executive. This strategy is often used by employers as a way to attract and retain talented executives by providing them with additional benefits. The payment is typically structured as a bonus, which not only helps cover the costs of the life insurance premium but also serves as an extra incentive for the executive.

This arrangement can also be beneficial for both parties. The executive receives a valuable life insurance policy, which can be a significant financial security tool for their beneficiaries. At the same time, the employer may get tax advantages, as the bonuses can be deducted as a business expense. This makes option B the correct answer, as it accurately depicts the nature of the executive bonus arrangement in relation to life insurance policies.