Health and Life Insurance

Answer: C - Typically, life insurance policy dividends are received tax-free and are not reported on the policy owner's tax return. This is because life insurance policy dividends are considered to be a return of premiums that were previously paid into the policy. Therefore, dividends are considered to reduce the cost of a life insurance policy and are not taxable, at least until they begin to exceed the net premiums that have been paid into the policy.