This depends on whether the insurance policy is standalone, or part of a benefits package. It is difficult to say for sure whether critical insurance pay-outs from benefits packages are taxable because some benefits packages are taxable, and others aren’t. A standalone package would generally not be taxable.

The tax situation also differs by countries and regions. For example, in Canada, critical illness insurance benefits are tax free. It is best to check with a tax advisor for any tax questions – to get the advice relevant to your particular region.