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

Received income-tax-free

Lump-sum life insurance death benefits are generally received income-tax-free by the beneficiary.

2. Cash value growth inside a life insurance policy is generally:

Tax-deferred while it remains in the policy

Inside cash value typically accumulates tax-deferred; taxation may occur on certain withdrawals or surrender gains.

3. During the payout phase of a nonqualified annuity the portion representing earnings is:

Taxable as ordinary income

Annuity payouts use an exclusion ratio; the earnings portion is taxable as ordinary income while the return of principal is not.

4. A life insurance policy classified as a Modified Endowment Contract (MEC) loses favorable tax treatment on:

Distributions such as loans and withdrawals (taxed gain-first with possible penalty)

A MEC is taxed on living distributions on a gain-first (LIFO) basis, often with a penalty before age 59 1/2; the death benefit generally remains income-tax-free.