My $250,000, fully paid up, life insurance policy contains a Critical Illness rider. How will the $250,000 payout impact my Federal and CA tax liabilities?

[Opus 17]

Generally speaking, if you paid for the policy with after-tax dollars and did not get a tax deduction for the premiums (which would be very unusual) then any benefit paid out under the terms of the plan are not taxable.  They also don't count as "income" for other deductions, credits, or tax items with dollar limitations.