Which of the following is considered non-taxable?

Policy dividends are considered non-taxable because they are essentially a return of excess premiums that have been paid to the policyholder. When a life insurance policy is issued by a mutual insurance company, it may generate profits that are distributed back to policyholders in the form of dividends. These dividends are not classified as income; instead, they reduce the policyholder's basis in the policy. As such, since the policyholder has already paid premiums on which the dividends are derived, these amounts are not subject to taxation when received.

The other choices present taxable elements. Policy premiums are the amounts paid by the policyholder to keep the insurance coverage active; these amounts are not typically taxable to the policyholder. Death benefits, while they are received tax-free by beneficiaries, are considered a part of the overall insurance mechanism which is distinct from policy dividends. Lastly, capital gains from investments made by the insurance company are subject to taxation, as these gains are recognized as income once realized. Thus, policy dividends stand out as a non-taxable benefit in the context of life insurance policies.