How Much Are Taxes On Life Insurance? 
In some business scenarios , where the company is the owner and beneficiary of the policy , the death benefit proceeds could be subject to the alternative minimum tax as well as ordinary income tax . With married couples , the death benefit proceeds could be subject to estate taxation upon the second death . But in general death benefit proceeds go tax free to the beneficiaries . Cash values in a life insurance policy , while the insured is alive , could be taxable if the life insurance policy was classified as a modified endowment contract and was annuitized or policy loans of gain were taken . The gain in a non-modified endowment policy could also be taxed at ordinary income tax rates , if the policy lapsed with accumulated gain in the contract , receipt of any policy loans and any internal policy loans that exceed basis . However , if a non-modified endowment policy is kept in force for the life if the insured policy loans of gain and withdrawals of basis could be tax free . But always consult your tax and legal advisers before moving forward with any purchase of a life insurance policy . 