Does Life Insurance Money Count As Income? 
Life insurance income that can be taxable if the contract is a modified endowment contract or the life insurance cash values are annuitized . Universal life insurance policies issued after June 21 , 1988 with gain in the contract that is governed under TAMRA could cause withdrawals to be taxed during the first 15 years of the policy . If the policy lapse before the death of the insured , all policy loans exceeding basis and internal policy loans are characterized an phantom income taxable at ordinary income rates . 