1. Generally, a life insurance death benefit paid to a named beneficiary in a lump sum is:

Received free of federal income tax

Life insurance death proceeds paid to a beneficiary are generally received income-tax-free for federal purposes.

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

Tax-deferred while it remains in the policy

Cash value generally grows tax-deferred while it stays in the policy, with no annual tax on the inside buildup.

3. When a life policy is classified as a modified endowment contract (MEC), distributions such as loans are:

Taxed on a last-in, first-out basis with possible penalties before age 59 and a half

MEC distributions are taxed gain-first (LIFO) and may carry a penalty if taken before age 59 and a half.

4. A properly executed Section 1035 exchange allows a policyowner to:

Exchange one life or annuity contract for another without immediate income tax

A 1035 exchange lets an owner swap one qualifying life or annuity contract for another without recognizing gain at the time.