Well this falls into a yes and possibly no. Its all according to who pays your premiums. Or should I say how the premiums are paid. If your employer pays them, then Yes you do have to pay Tax on benifits rec. If its deducted from your salary tax free then yes again. The only exception to this would be if an individual had a loss of limb or body function. It would be Tax free under those circumstances regardless. Now to get Tax free payments an Individual can purchase the policy with after tax dollars and have to pay no tax on benifits. But its got to be after tax dollars. This all falls under "IRS Private Letter Ruling 8027088"
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