Insurance Settlement

Insurance Settlement means:
receipt of the proceeds of an insurance policy. The settlement terms are stated in the policy and are sometimes optional. When optional, beneficiaries may claim an immediate lump sum payment or choose periodic payments. Most often life insurance proceeds are not taxable unless there has been a sale or exchange of the insurance contract to someone other than a partner of the insured, a partnership in which the insured is a partner, or a corporation in which the insured is an officer or shareholder. When life insurance proceeds are received in installments, the annuity rules are used to apportion each payment between the principal element (nontaxable) and the interest element (taxable). Former IRC (check if this IRC provision is current here) §101 (a).