The “Million Dollar” in a million dollar life insurance policy can surely make it look tempting, but quite far-fetched as well.  Like any other life insurance, a million dollar life insurance is a contract between an insurance policyholder and an insurer. In the situation of the death of the insured person, the insurer must pay the designated beneficiary a sum of money, in this case, 1 million dollars, in exchange for a premium. As long as your estate is not named as the beneficiary and you haven’t bought the policy as a third party, the proceeds from the insurance will be non-taxable.