Does life insurance get taxed? 
The death benefit is usually income tax free to the beneficiary . The reason why I say usually is because there are a few circumstances where the benefit would be taxable . If the death benefit is paid out in installment payments and is gaining interest , the beneficiary would have to pay taxes on the interest earned . The beneficiary of a life insurance policy receives a lump sum of money from the insurance company that is not included as income . The applicant does not pay any taxes on their premium payments as well . Life insurance also skips probate court . Probate court is the court that deals with distribution of assets after one passes . Most individuals have their assets tied up in probate from six months to over two years . Walt Disney passed away in 1966 his estate is still in probate . Nobody has access to the individuals estate until it has gone through the probate court . Life insurance bypasses the probate process and goes to the beneficiary income tax free in most cases . 