Chapter 16 Loss of Life 风险相关管理与保险英文版课件.pptVIP

Income Tax Treatment of Life Insurance Premiums In most cases, individuals cannot deduct the premiums they pay for individual life insurance The primary exception is for someone who is paying premiums on a life insurance policy owned by a charitable organization Death benefits As a general rule, when an insured dies and a death benefit is paid The beneficiary does not have to report the death benefit as taxable income if the proceeds are paid in a lump sum When settlement is made through a series of periodic payments from the insurer The beneficiary generally can exclude only part of each payment from taxable income The amount of each payment that represents a distribution of the original death benefit is not taxed While the portion that is due to interest earnings is subject to taxation Income Tax Treatment of Life Insurance Cash values If a life insurance policy with a cash value is terminated before death and the contract is surrendered for cash It is likely that there will be taxable income that must be reported in the year of the surrender The amount of taxable income is the difference between the cash received at termination and premiums that were paid during life of the contract While a cash value policy is in force, the annual increments to the cash value (inside buildup) often escape immediate taxation In many policies these increments are not taxed until the policy is surrendered for its cash value Income Tax Treatment of Life Insurance Cash Values In some policies however, taxation of part of the inside buildup occurs every year The determining factor depends on whether the policy meets the statutory definition of life insurance as specified in the IRC Policies that meet this definition are not subject to immediate taxation of their inside buildup Cash values of policies that cannot meet the requirements will be partially taxed each year According to the IRC, a policy is considered to be life insurance for tax purposes of it meets at