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Are Life Insurance Proceeds Taxable?

Billy Johnson: Hey again. Another question. This is Billy Johnson from Billy Johnson Insurance Agency, and wanted to share with you an answer to what looks like a pretty common question about life insurance. A lot of people ask, are the proceeds taxable? And the quick answer there is, no, because it’s an insurance product. When you get $500000, you get $500000. You don’t have to claim that on your income tax. You don’t have to do anything like that. It’s exempt.
So, that’s really good news for people who have just gone through a difficult situation, and they have to start making plans, and that would be so terribly complicated if tax implications came into that. And so, the reason that is, is because it’s looked at like, life insurance is an instrument to help when you have maybe lost the income of a partner that you planned on having around for another 10 years. Well, you have gotten all that income at one time, and so you shouldn’t be taxed that way either. So, the income that you get, you’re able to invest, and then sometimes from the proceeds of those investments, you would pay the normal taxes. But on that payout, that original payout, you’re not going to pay anything.
So, I hope that’s some good information for you, and I hope that it’s helpful, and I hope you have a great day. Thanks. Bye.