QuestionAugust 12, 2025

Which of the following is true regarding taxation of accelerated benefits paid under a life insurance policy? A. They are received tax free. B. They are considered taxable income. C. They are taxable to the insured's estate. D. They are tax deductible.

Which of the following is true regarding taxation of accelerated benefits paid under a life insurance policy? A. They are received tax free. B. They are considered taxable income. C. They are taxable to the insured's estate. D. They are tax deductible.
Which of the following is true regarding taxation of accelerated benefits paid under a life insurance policy? A. They are received tax free. B. They are considered taxable income. C. They are taxable to the insured's estate. D. They are tax deductible.

Solution
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Answer

A. They are received tax free. Explanation 1. Identify the nature of accelerated benefits Accelerated benefits from a life insurance policy are typically paid out when the insured is terminally ill or facing a severe medical condition. 2. Determine tax treatment According to IRS guidelines, accelerated benefits paid under a life insurance policy are generally **received tax-free** if the insured is certified as terminally ill by a physician.

Explanation

1. Identify the nature of accelerated benefits<br /> Accelerated benefits from a life insurance policy are typically paid out when the insured is terminally ill or facing a severe medical condition.<br /><br />2. Determine tax treatment<br /> According to IRS guidelines, accelerated benefits paid under a life insurance policy are generally **received tax-free** if the insured is certified as terminally ill by a physician.
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