Accelerated death benefits paid to an insured who has been certified as terminally ill are generally:

Explanation

Accelerated death benefits paid because an insured is terminally ill are generally treated like a tax-free death benefit and received income-tax-free, which lets the insured use the money for care without a tax burden. They are not fully taxable, not taxed as capital gains, and not deductible. This favorable treatment (subject to certain limits for chronically ill insureds) reflects the policy goal of helping seriously ill insureds access their benefits early.