Is Term Life Insurance Payout Taxable? 
A life insurance policy indemnifies the beneficiary for the loss of the insured . That relationship has to exist only at the time of application . The theory is that the death of the insured created an economic loss , the value of which was established at an earlier point in time -LRB- the death benefit . -RRB- A group of people with similar exposure to economic loss joined together to share the risk of this type of loss . When one person dies , the premiums paid into a fund provide a death benefit to offset the economic loss . For this reason there isnt an income taxable event . 