If the beneficiary of the life insurance is your next-of-kin or your estate, the compensation will be subject to inheritance tax. From a tax perspective, the next-of-kin are the insured’s marital spouse, heirs in the direct line of ascent and in the direct line of descent, adopted children and their direct heirs, foster children and the children of the spouse. For other beneficiaries, the life insurance compensation is taxed as capital income. After paying the compensation, the insurance company will inform the Tax Administration of the insurance payout.