Are Cancer Insurance Benefits Taxable and Other Essential Insurance Questions Answered

Are insurance benefits taxable? Does the government tax you for premiums paid by your employer? Find out the answers to niggling insurance questions you’ve always wanted to ask!

by Sam Bautista, 24 November 2017

We all have questions we want to ask our insurance providers, but we often find ourselves hesitant to do so for various reasons. You may be wondering: will this make me seem ignorant? Will my agent think I am not paying attention? Or will they be appalled by such an “unethical” question? There’s no reason you should be in the dark about details in your policy that you may still be unclear about so we’re answering questions that range from cancer insurance benefits to tax implications for critical illness.

Are Cancer Insurance Benefits Taxable?
The payout you get from an insurance benefit isn’t taxable. You paid for your premiums fair and square so a lump sum you receive for a cancer policy shouldn’t be considered as income. Phew! No need to include that in your report to the taxman.

If Insurance is Paid by Your Employer as a Benefit, Is it Taxable?
If both you and your employer contributed to pay for the premiums of the plan, only the amount contributed by your employer is considered taxable.
If, however, the contributions are paid as an after-tax payroll deduction, you will not be taxed as that will be tantamount to double taxation.
Check your employment contract as well.  If the insurance is part of your compensation and the premiums are taken out of your salary, you are technically paying for it yourself. Therefore, it shouldn’t be taxed.

Is a Critical Illness Policy Worth Paying for?
Some people don’t feel the need for it as they already have comprehensive health insurance.  Other people like knowing they are prepared for every eventuality.
Note that critical illness coverage is also offered as a rider for life insurance policies. You may want to discuss the possibility of adding a little more to your monthly premium with your insurance provider. This will surely be a small price to pay for your peace of mind. 

Should I Worry about Being Taxed for Reimbursements for Medical Bills?
Any money that has gone towards paying for your cancer treatment isn’t taxable. The money used to pay for surgery, chemotherapy, and radiation is not considered taxable and as such, insurance checks going towards paying for these are tax- exempt.

In the end, if you feel that you have questions you want answered, do not hesitate to ask. Your insurance provider would be more than happy to answer all your queries and clarify things that are still unclear to you.