Capital gains refer to the profit received from the sale of a capital asset, such as bonds, stocks, or real estate, wherein the sale price exceeds the purchase price. The difference equals the amount of capital gains. In terms of insurance, cash value and death benefits from life insurance policies do not count; however, the proceeds from a sale of a policy to another person would.
As capital gains are subject to tax, it is important for a policyholder to understand the regulations surrounding their policy and the subsequent proceeds. Those who decide to sell their life insurance for a profit must declare it as capital gains and pay the appropriate tax. Note though that transferring the rights to the policy for no consideration would not count as capital gains.
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