Will I Be Taxed On Life Insurance? 
Life insurance does not incur income tax . That is a great feature about life insurance . It allows the beneficiary to get more money than if income taxes had to be paid on it , and makes the funds more quickly accessible -LRB- since it does not have to go through probate -RRB- . if you take them death benefit in installments , you will pay income tax on the interest paid to you for the money you have not yet received . 