Why do individual life insurance policy beneficiaries receive death benefits free from income taxation?

Question

Quizplus · Accepted Answer

Because the premiums on individually owned life insurance policies are paid with funds that have already been subject to income taxes and therefore, the proceeds from these types of policies are received income tax free by the beneficiary. Such proceeds, however, could still be subject to estate taxation. This is based in large part on whether or not the insured has an ownership interest in the policy at the time of their death.

Why Do Individual Life Insurance Policy Beneficiaries Receive Death Benefits