1. Life insurance death benefits paid in a lump sum to a named beneficiary are generally:

Received income-tax-free

Life insurance death proceeds paid because of the insured's death are generally received income-tax-free by the beneficiary, though estate tax can apply in some cases.

2. The growth of cash value inside a permanent life insurance policy is generally:

Tax-deferred while it remains in the policy

Cash value generally accumulates on a tax-deferred basis; taxation may arise on amounts withdrawn or surrendered above the cost basis.

3. When a deferred annuity is annuitized, the portion of each payment representing the owner's contributions is:

Returned tax-free as a return of basis

Through the exclusion ratio, the part of each annuity payment representing the cost basis is returned tax-free, while the earnings portion is taxable as ordinary income.

4. A Section 1035 exchange allows a policyowner to:

Exchange one life or annuity contract for another without immediate tax

A 1035 exchange permits a tax-free transfer between like contracts (for example, life-to-life or annuity-to-annuity), preserving the original cost basis.