Why Are Life Insurance Proceeds Not Taxable? 
Life insurance started as a financial vehicle to protect widows and orphans . It was determined to not tax those proceeds , as they in fact saved the government money that would have gone to caring for those who had lost spouse or parents , had they not had life insurance . Since then , life insurance is used for many more purposes , but is still seen as a benefit that should remain tax free due to its alleviation of financial devastation for survivors at the time of death . 