By Team Member | September 20, 2023

Are Life Insurance Policy Payouts Taxable? (LIVONIA, MI)

Hi, I’m Cheryl Bowker, an Insurance Agency owner. Every day. I get questions from customers on a variety of different topics. So I thought what I would do is put together a series of common questions with some answers. So stay tuned.

Some life insurance policyholders are a little bit concerned about whether or not any payout provided by their policy is subject to taxation, but rest assured. With only really a handful of exceptions, life insurance payouts are not going to be taxed because most forms of insurance payouts aren’t considered income and therefore are not subject to income tax.

However, in some cases, if you have, say, a significant amount of assets, then your life insurance payout may be subject to estate taxes. So how do you avoid taxation in this situation? Well, I’ll tell you, life insurance products can often be set up in a way that will prevent your family from having to pay estate taxes on those funds.

So to ensure that your life insurance and tax liabilities are all in order, we suggest that you speak with your tax advisor and insurance agent before making any final decisions. We’d be happy to review your insurance coverage options with you! Give us a call at (734) 525-9610 or visit