Is Life Insurance Taxed As Income? 
No , Life Insurance is normally exempt from income tax . If the policy is a group policy , only the first $ 50,000 is tax free . If there is cash value above the face amount , that excess may be taxed as income ; or if you take the life insurance in installments , the interest may be taxed . If you surrender a policy , the amount of cash value in excess of the premiums you paid in might be taxed . If your policy is a modified endowment contract , loans and withdrawals will be taxed . There may be a few other legalities , but by and large , when someone is named the beneficiary on a life insurance policy and when the insured person dies , the beneficiary will not have to pay any income taxes on the death benefit received . 