What is a death benefit? Is it taxed?

A death benefit, also referred to as the policy proceeds, is the amount of money that an insurer pays to your beneficiary if you pass away during the policy term. Typically, it is paid in a single lump sum.

In most cases, the death benefit is not taxed. That said, if your beneficiary chooses to do something less common like distributing the death benefit in installments while investing it, or including the benefit as part of an estate settlement, there may be tax implications for the beneficiary. Make sure to check with an accountant or financial advisor if you think this may apply to you or your beneficiaries.