Co-Founder, Coastal Financial Partners Group, California
In most cases, no. Life insurance proceeds are normally received income tax free by the beneficiary.
There are situations where the proceeds can be taxable such as with employer owned life insurance where certain requirements to make the proceeds non taxable are not met. Or in the case of policies that have three different parties to the contract - insured, owner and beneficiary are different - insurance proceeds might become taxable.
If you're referring to you receiving a lump sum proceed from a life insurance death benefit, the answer is generally no. If you're referring to a lump sum surrender of cash values from a life insurance company, then there may be an ordinary income taxable event on all gain in the policy.
As the other contributor stated, there are no income taxes owed on a lump sum of life insurance paid out to a beneficiary, in most instances. If the beneficiary is the estate, or if there is no beneficiary listed, the proceeds will be left to the estate and taxes will be charged.
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There are situations where the proceeds can be taxable such as with employer owned life insurance where certain requirements to make the proceeds non taxable are not met. Or in the case of policies that have three different parties to the contract - insured, owner and beneficiary are different - insurance proceeds might become taxable.