Carol has an individual disability income policy. Which of the following is true?

a. Premiums are paid with pre-tax dollars and benefits are received tax-free.

b. Premiums are paid with pre-tax dollars and benefits are taxable.

c. Premiums are paid with after-tax dollars and benefits are tax-free.

d. Premiums are paid with after-tax dollars and benefits are taxable.

Answer: c. Premiums are paid with after-tax dollars and benefits are tax-free.