Is Life Insurance Taxed As Income? 
Under most situations , no . Life Insruance proceeds are not classified as income -LRB- for tax purposes -RRB- so the IRS does not tax the benefits as such . This applies to the traditional way life insurance is purchased ; a person buys a policy , names their spouse as beneficiary , person dies and spouse gets a check to cover funeral costs and help offset loss of income caused by death . If life insurance is owned by a company -LRB- as in key man insurance -RRB- or through other means then it may trigger a taxable event . Consult with your accountant for more specific details . 