What Happens When Life Insurance Policy Matures? 
Assuming that the question is referring to when a permanent life insurance policy matures , it depends on the type of life insurance and the policy owner activity that preceded the maturity date . But in general terms , at maturity , all policy gains are characterized as ordinary income and taxed accordingly . Any outstanding policy loans received by the policy owner are characterized as ordinary income and taxed accordingly . Any internal loans cause by the cannibalization of cash values to pay annual policy loan interest are also characterized as ordinary income and taxed accordingly . 