When Life Insurance Policy is Taxable and How To Avoid Taxation.

Posted by admin on 07/12/2014 with No Comments
in ETT

Although there are many benefits of buying life insurance, the only question that many people ask is, is life insurance taxable? Life insurance can benefits you or the beneficiaries in time of need and its importance cannot be ignored. It is common to find a person who has died without a valuable inheritance to his family. In such a case, their loved ones are left in a miserable life asking for donations. If you are family’s bread winner, it is very important to purchase life insurance to avoid such awful happening to befall your family. Back to the question, is life insurance taxable?

In many cases, life insurance cover is paid out to the heirs or beneficiaries without being taxed. However, in some situations, part of proceeds may be taken as a taxable income. For example, if the life insurance benefits are paid to the beneficiaries or heirs in a lump sum, they are not considered as part of taxable income, thus, they are exempted from taxes. The tax free exclusions may also include death payment made under worker’s compensation, insurance contract, endowments contract, employer’s group plans and health insurance contracts. Read more…