With personal life insurance, the lump-sum death benefit is received by the beneficiary...

The lump-sum death benefit received by the beneficiary of a personal life insurance policy is typically tax-free. This means that when the insured individual passes away, the beneficiaries can receive the proceeds without having to pay income tax on that amount. This tax advantage is one of the main attractions of life insurance, as it allows for the financial support needed by the beneficiaries to be available immediately at face value, without reductions due to taxation.

The tax-free benefit is an important feature that helps ensure that loved ones are financially secure after the passing of the insured person. While there may be some exceptions in certain situations regarding estate taxes if the policy is part of the deceased's taxable estate, the general rule is that the death benefit itself is not subject to income tax. This distinguishes it from loans, which would incur interest and must be repaid, and from amounts that may need to go through the probate process, which could delay access and potentially incur additional costs.