What amount received by a beneficiary due to the insured's death is typically free from federal income taxation?

The amount paid to the beneficiary as a result of the insured's death is generally free from federal income taxation due to the tax provisions outlined in the Internal Revenue Code. Specifically, under section 101(a), amounts received by a beneficiary as a death benefit from a life insurance policy are typically excluded from the beneficiary's taxable income. This tax benefit is significant because it allows beneficiaries to receive the full intended financial support without any deduction for federal tax obligations, ensuring that families and heirs can utilize the full amount for expenses such as funerals, estate costs, or other financial needs following the death of the insured.

In contrast, the other options do not represent amounts that are typically exempt from taxation in the same manner. Premiums paid and the initial premium amount are costs incurred by the policyholder and do not relate to the amount received by the beneficiary upon the insured's death. The cash value of the policy, while it may have tax implications depending on withdrawals or loans taken against that value, is not the amount received directly by beneficiaries as an outcome of the insured's death and can have different tax treatments based on how it is accessed.