Life insurance payouts are generally not taxable as income, but there are some exceptions. The general rule is that if you receive a life insurance payout as a beneficiary due to the death of the insured person, the amount is not considered taxable income. This applies to both term and permanent life insurance policies. However, there are some situations where life insurance proceeds may be subject to taxation. For example, if the policyholder has sold their life insurance policy to a third party for a lump sum, any proceeds received from the sale may be subject to taxation. Additionally, if the policyholder has taken out a loan against the cash value of a permanent life insurance policy and the policy lapses or is surrendered, the amount of the loan that exceeds the premiums paid may be subject to taxation. It's important to consult with a tax professional to understand the specific tax implications of life insurance payouts in individual cases.