1. Life insurance death benefits paid in a lump sum to a named beneficiary are generally treated how for federal income tax?

Generally received free of federal income tax

Life insurance death proceeds paid as a lump sum are generally not subject to federal income tax for the beneficiary.

2. The growth of cash value inside a permanent life insurance policy is generally treated how while it remains in the policy?

Tax deferred

Cash value generally accumulates on a tax-deferred basis as long as the funds remain inside the policy.

3. A life insurance contract that is overfunded beyond federal limits may be classified as what?

A modified endowment contract

A policy funded faster than the seven-pay test allows becomes a modified endowment contract, changing the tax treatment of distributions.

4. When annuity payments begin, the portion representing previously taxed principal is generally treated how?

Excluded from income as a return of basis

Through the exclusion ratio, the part of each annuity payment representing the owner's after-tax cost basis is received income tax free.