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

Received income-tax-free

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

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

Tax-deferred while it remains in the policy

Inside buildup of cash value generally accumulates tax-deferred as long as it stays within the policy.

3. When annuity payments are received, the portion representing earnings is generally:

Taxable as ordinary income

The earnings portion of annuity income is taxed as ordinary income, while the return of principal is not taxed.

4. A life insurance policy classified as a modified endowment contract (MEC) loses:

Favorable tax treatment on distributions like loans and withdrawals

A MEC results when premiums exceed federal limits, causing distributions to be taxed less favorably (gain first, with possible penalty).