FRIDAY, NOVEMBER 18, 2011
There are some questions that have an easy answer. Unfortunately, the title of this blog post is not one of them.
Between the complexities of the tax code and the many different ways your insurance policies can be structured, it’s impossible to write a thorough break down of what is, and isn’t taxable in terms of insurance proceeds that would take less than an hour to read.
However, we can give you an overview of some points that may help clarify a few things about the taxability of your insurance proceeds:
1. Life insurance proceeds can be taxable if the named beneficiary was also a policy owner or if the death benefit is paid to the estate rather than a trust or individual. You can also be taxed if you surrender the policy and the surrender value is more than what you paid in.
2. Auto insurance proceeds are not taxable in most circumstances. However, if your claim allows you to make a gain of some sort, perhaps through pain and suffering payments from an at-fault driver, they may be. You should always ask your agent about your specific claim if you are unsure.
3. Health insurance proceeds are not taxable.
4. Home insurance proceeds, like auto insurance proceeds, are usually not taxable unless they create a gain for you. For example, if you are injured in a neighbor’s home, file suit against them, and part of the insurance proceeds are for lost wages, they may be taxable. Again, check with your agent on your specific claim to be sure.
5. Disability insurance benefits are generally not taxable if the premiums were paid with after-tax dollars.
For every type of insurance policy that you can receive proceeds from, there could be a different circumstance or set of rules surrounding the taxability. While you can often figure out your tax liability by determining whether or not you are making a gain from the proceeds, that is an overly simplified way to look at things. So instead, remove the guesswork and give us a call. We can go over any questions you may have about the taxable nature of insurance benefits.
Contact a trusted agent at Insurance Advisors and learn more about your Denver Home insurance proceeds.
Posted 4:37 PM Tags: tax, insuranec, home, life, auto, health, disability, homeowners, automobile, denver, colorado, co
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