Health and Life Insurance

Category - Tax Issues

Most withdrawals from life insurance policy cash value amounts are typically tax free up to __________.
  1. The policy owner's basis in the policy
  2. The amount of dividends that are received
  3. 50 percent of the death benefit amount
  4. 75 percent of the death benefit amount
Explanation
Answer: A - Most withdrawals from life insurance policy cash value amounts are typically tax free up to the policy owner's basis in the policy. This is because the policy owner has already paid income tax on the premium dollars, or basis, so they won't be taxed again when or if they withdraw those funds from the policy.
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