Does Life Insurance Money Get Taxed? 
For personally-owned policies , life insurance death benefits paid in a lump sum to the beneficiary are received income tax free - a unique and important benefit . If the beneficiary is a business and that business owned the policy , the business is generally not subject to the regular corporate federal income tax on the death proceeds provided special requirements are satisfied for policies issued or materially modified since August 17 , 2006 -RRB- . Policy cash values grow tax-deferred . If the policy is fully surrendered for its cash value , the amount in excess of basis -LRB- premiums paid less withdrawals taken -RRB- is gain and would be income taxable to the policyowner . This is a high level , general overview for insurance planning purposes and may not be used as tax advice . For tax advice you should seek the services of a tax professional . 