Life Insurance Buying Tips

Are life insurance policies taxable when collected?

Filed under: life insurance — Alston @ 1:00 am March 23, 2014

Life insurance death benefits are typically not taxable to the beneficiary.  However, of no beneficiary is named, or the beneficiaries have predeceased the insured person, they can be.

You can expect to pay taxes on any interest you earn on the life insurance proceeds.  If you receive the death benefit in installments, some portion of the installment will be considered interest income.

You can find more information about how life insurance is taxed here.

If the estate is the beneficiary of the policy, the proceeds can be subject to estate taxes if the total value of the estate is large enough.  If no beneficiary is named, the estate is the beneficiary by default.

Life insurance allows an individual to leave large amounts of money to their loved ones without the tax consequences of associated with other types of assets.

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