Although the primary purpose of life insurance is the death benefit to your beneficiaries, whole life (or cash building) life insurance policies typically have certain tax advantages that may be appealing.
- Cash Value Life policies may pay dividends, which aren’t taxable. Dividends are considered a return of premium. You can take these dividends as a check, apply them to reduce or eventually pay the entire premium, invest them to the cash value portion of the policy to continue to grow, or apply them to increase the face amount of your coverage.
- The cash value grows without taxation. Cash value insurance builds cash value inside the policy as you pay premiums. Since you pay the premiums with after-tax dollars, the buildup of the cash value is allowed to grow tax deferred.
- You can access the cash value of the policy at any age, at any time, and for any reason. Compare that advantage to the penalty of “borrowing” YOUR MONEY from plans such as your 401(k) or IRA if you’re under age 59½ and possible penalties if the money is not paid back by a certain time.
- Typical of all insurance policies, the lump sum death benefit is likely paid out to your beneficiaries income tax free. Life insurance inheritances can be substantial – and may go a long way toward making financial reality better for your loved ones, possibly for generations to come. Taking away the government’s tax bite can be a big advantage for your beneficiaries.
The many types of life insurance available today make it easier to help protect loved ones while achieving other financial goals. For more information, simply reply to this email and request our detailed information on types of Life Insurance.
CATEGORY: Personal Insurance | September 27th, 2017 | BY: Neal Pettinelli