Life insurance is generally tax free when the policy remains in force and the insurer pays the death benefit to a named beneficiary. In this common scenario, the death benefit is not subject to federal income tax. Policyholders can also access funds through withdrawals or loans under certain conditions, and some types of life insurance provide tax-advantaged growth while the policy is active. These rules are shaped by federal law, the type of policy, and how the coverage is owned or designed. The following sections explain the core principles, limits, and exceptions in durable, practical terms.
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