Does Life Insurance Count As Income? 
Life insurance that is left to a beneficiary is generally not counted as income to that person , and income taxes do not have to be paid on it . Exceptions are : 1 -RRB- If the life insurance is left to the estate . 2 -RRB- If the policy was overfunded so that it no longer meets the criteria for being life insurance . 3 -RRB- If the proceeds are taken as an annuity , the interest is taxed . 4 -RRB- Small business may find that life insurance is taxed if they do not adhere to certain regulations . Contact an experienced agent to be sure your life insurance is set up so that the proceeds are not counted as income . 