Retirement Read Time: 3 min Choose Your Own Retirement Adventure Share | Related Content When Life Insurance Becomes Taxable Life insurance proceeds are generally tax-free. But not in all cases. Insurance Needs Assessment: When You're Young and Single Even if you’re young and single, you should still consider protecting yourself. What Is a 1035 Exchange? 1035 exchanges provide a way to trade-in an annuity contract or life insurance policy without triggering a tax liability.