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If I receive funds from a life insurance policy upon the death of my father, are the funds tax free?

Last Updated: March 26, 2008

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Yes. Whenever one has an insurable interest in a life insurance policy, any funds received as a beneficiary are tax free. You are always considered to have an insurable interest if the insured person is a family member.

Of course, if you save or invest the money that you receive and earn interest, dividends, or capital gains as a result, the earnings on your life insurance settlement would be taxable.

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If I receive funds from a life insurance policy upon the death of my father, are the funds tax free?

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