Life Insurance Policy Provisions, Options, and Riders
How is the lump sum paid under the cash settlement option treated for federal income tax?
Answer and explanation
Answer: A. A death benefit paid because of the insured's death is generally excluded from the beneficiary's gross income when taken as a lump sum. Interest that the insurer adds after the death, under an instalment or interest option, is the part that becomes taxable.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, settlement option cash payment
More life insurance policy provisions, options, and riders questions
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