How is a Disability Income Benefit Received Under a Life Insurance Policy Treated for Income Tax Purposes?

When policyowners receive disability income benefits under a disability rider attached to a life insurance policy, the tax rules treat the amounts as a separate accident or health benefits and not as proceeds from the life insurance policy. Thus, such benefit payments are excludable from income as “amounts received through accident or health ­insurance… for personal injury or sickness.

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Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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