New messages from Aflac |
View Notifications opens a dialog
Close X dismisses the notification alert
Life insurance payouts aren’t usually taxable. But there are some exceptions you should be aware of if you have a policy or plan to apply for one. Let’s dive deeper into how beneficiaries and death benefits work, when beneficiaries may need to pay taxes, and what life insurance policies Aflac offers.
Table of Contents
A beneficiary is a person or entity that you can name in a life insurance policy to receive your death benefit upon your passing. You may choose one beneficiary or multiple beneficiaries, such as:1
Additionally, you may change your beneficiary if you need to.
The death benefit is the amount of money your life insurance company will pay out to your beneficiaries if you pass away during your policy’s term. While the death benefit is typically paid out in a lump sum, your beneficiaries can choose other payment options. The amount they’ll receive depends on the face value of your policy minus any withdrawals from your cash value account or policy loans you didn’t repay.2
Don’t wait until it’s too late. Help cover yourself and your family with coverage from Aflac.
Get StartedIn many cases, the money your beneficiaries receive from a life insurance payout is not taxed as income. However, there are a few exceptions that we’ll go over below.
Some common situations where beneficiaries might owe taxes on life insurance include:3
If life insurance proceeds have accumulated some interest, taxes are usually due. Fortunately, the amount that earned interest will be taxed, rather than the entire death benefit.
In the event a policyholder chose their estate as a life insurance beneficiary, taxes might apply. The taxes loved ones may pay depend on the estate’s value.
The person that buys a life insurance policy is usually considered the owner and insured. But if a different person holds each role, there may be taxes involved.
Fortunately, there are some strategies beneficiaries can use to avoid paying taxes on a life insurance payout, such as:
When an estate is involved, whether life insurance proceeds are taxable is based on the policy’s ownership when the insured passes away. To avoid taxation, you can transfer ownership of your policy to another person or entity.4
If you set up an irrevocable life insurance trust (ILIT), it will own the life insurance policy rather than you. This means the proceeds will not be included in your estate. You can state how you’d like the beneficiaries to receive or use the payout.5
A gift tax comes into play if the life insurance policy’s cash value is higher than the gift tax exemption, which is a lifetime amount of $13.99 million or $19,000 per year as of 2025.6 It’s a good idea to ensure your cash value does not exceed this amount.
A life insurance death benefit can help protect your loved ones financially upon your passing. The good news is that it’s not taxable in many cases. However, there are several exceptions you should know about and keep in mind when you set up your policy.
Aflac offers a variety of term, whole, and final expense life insurance plans with a variety of coverage options that can help you meet your goals. Chat with an agent today to get a quote or more information.
Get Started
Child life insurance can guarantee coverage for them and can offer a cash value benefit later on. Learn what child life insurance is and the pros and cons.
Life insurance with cash value lets you withdraw money to cover necessary expenses. Find out how cash value savings work and the types of insurance policies offered, including whole life insurance.
Child life insurance can guarantee coverage for them and can offer a cash value benefit later on. Learn what child life insurance is and the pros and cons.
Life insurance with cash value lets you withdraw money to cover necessary expenses. Find out how cash value savings work and the types of insurance policies offered, including whole life insurance.
1 Insurance Information Institute - What is a Beneficiary? https://www.iii.org/article/whatbeneficiary. Accessed September 16, 2025.
2 Policygenius - What is the face value of a life insurance policy? Updated February 9, 2024. https://www.policygenius.com/life-insurance/face-value-of-a-life-insurance-policy/. Accessed September 16, 2025.
3 U.S. News - Do Beneficiaries Pay Taxes on Life Insurance? Updated June 30, 2025. https://www.usnews.com/insurance/life-insurance/do-beneficiaries-pay-taxes-life-insurance. Accessed September 16, 2025.
4 Physicians Thrive - 3 Ways to Avoid Taxes on Life Insurance Benefits. Updated December 27, 2024. https://physiciansthrive.com/life-insurance/avoid-taxes-life-insurance-benefits/. Accessed September 16, 2025.
5 Glenmede - Irrevocable Life Insurance Trusts for Estate Planning. Updated April 8, 2025. https://www.glenmede.com/insights-private-wealth/irrevocable-life-insurance-trusts-for-estate-planning/. Accessed October 13, 2025.
6 SmartAsset - Gift Tax, Explained: 2024 and 2025 Exemptions and Rates. Updated May 2, 2025. https://smartasset.com/estate-planning/gift-tax-explained-2021-exemption-and-rates. Accessed September 16, 2025.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, Aflac coverage is underwritten by American Family Life Assurance Company of New York.
Aflac life plans – A68000 series: Term Life Policies: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68200, A68300 & A68400. Whole Life Policies: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC1368100. In Delaware, Policy A68100. B60000 series: In Arkansas, Oklahoma & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Not available in Delaware. Q60000 series/Whole: In Arkansas & Delaware, Policy Q60100M. In Idaho, Policy Q60100MID. In Oklahoma, Policy Q60100MOK. Not available in Virginia. Q60000 series/Term: In Arkansas, Idaho, Oklahoma, Oregon & Texas, Policy ICC18Q60200M. In Delaware, Policy Q60200M. Not available in Virginia.
Aflac Final Expense insurance coverage is underwritten by Tier One Insurance Company, a subsidiary of Aflac Incorporated and is administered by Aetna Life Insurance Company. Tier One Insurance Company is part of the Aflac family of insurers. In California, Tier One Insurance Company does business as Tier One Life Insurance Company (NAIC 92908).
In AR, DE, ID, OK and VA: Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22. Aflac Final Expense policies are not available in New York.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY, VA or VT. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations, and exclusions.
Aflac WWHQ | Tier One | 1932 Wynnton Road | Columbus, GA 31999
Aflac New York | 22 Corporate Woods Boulevard, Suite 2 | Albany, NY 12211
Z2300721R2
EXP 10/26
