If I'm the beneficiary of a life insurance policy, will the money I receive be taxed?
No. Death benefits from a life insurance policy are not taxed.
If I withdraw money from a permanent insurance policy, will that money be taxed?
Yes. If you get back more money than you paid in premiums, that money is taxable. Let's say you cancel a permanent insurance policy after 20 years. You had paid $15,000 in premiums, and when you cancelled the account it had a cash value of $20,000. You would need to pay taxes on $5,000.