Tax Treatment of Individual Life Insurance


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question 1 of 3

Which of the following is TRUE of the taxation of the cash value of a surrendered whole life insurance policy?

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1. If Jon pays for a term life insurance policy with after tax dollars, how will the proceeds to his heirs be taxed?

2. Why is a life insurance dividend not subject to taxation?

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About This Quiz & Worksheet

The purpose of the quiz and worksheet is to see what you know about tax treatment of individual life insurance. Life insurance dividends and policies are the type of topics you'll see on the interactive, multiple-choice quiz.

Quiz & Worksheet Goals

Take the quiz to check your comprehension of:

  • The taxation of a life insurance policy that has been bought for an employee by the employer
  • Result of taxes on an insurance policy that was bought with money that the policy owner did not pay taxes on
  • Taxation of the cash value of a surrendered whole life insurance policy
  • How proceeds are taxed if a life insurance policy is paid with after tax dollars
  • Reason why life insurance dividends are not subject to taxation

Skills Practiced

  • Information recall - access the knowledge you have gained about the taxation of different insurance policies
  • Reading comprehension - ensure that you draw the most important information from the lesson on individual life insurance taxation
  • Interpreting information - verify that you can read information about why life insurance dividends are not taxable and interpret it correctly

Additional Learning

Work through the lesson named Tax Treatment of Individual Life Insurance to review more about this area of taxation. Objectives you can cover include:

  • Determine what 'beneficiary' refers to
  • Review examples of a premium
  • See how whole life policies work