PERMANENT LIFE INSURANCE: LIVING BENEFITS AND TAX-ADVANTAGE FEATURES
September 2021
What’s the one gripe most high-income earners have? Ahem…TAXES! What is the one gripe “everyone” has about insurance premiums… that if it were never needed it would have been paid in vain. As the saying goes, “Price is only an issue in the absence of value.” When you NEED it that’s really not the best time to realize the value.
Allow us to uncover some facts about permanent life insurance. Barring the obvious benefit of not outliving your insurance coverage, there are living benefits and tax- advantages. Permanent life insurance has tax-advantaged features that most are not aware of.
- Federally, income tax-free death benefit to your beneficiaries - This holds true for all types of life insurance.
- Tax-deferred cash value growth - As the cash value grows in the policy you won’t be taxed on it in any given year.
- Income tax-free dividends (if applicable)- If you have a whole life policy the dividends are tax-free.
- Tax-free policy loans and withdrawals while you’re living - Did you know you can withdrawal from your policy while living? There are guidelines but as long as your policy is active you can leverage your cash value.
- Increasing death benefit - If you select an increasing death benefit feature on your policy, the cash value at death will be included in the total death benefit proceeds paid to your beneficiaries, tax-free.
- Living benefit riders – Did you know some insurance carriers offer hybrid products? That means you can purchase a permanent life insurance policy and add a long-term care rider to it. If added, you may be able to access up to 4% of the death benefit for qualified long-term care (LTC) purposes. That means the death benefit would reduce equal to the amount you used for the LTC benefit. Kind of makes you feel better about paying premiums, right?
As you can see, if you are able to afford a permanent policy without effecting other financial obligations, if may be much more beneficial to have a permanent policy vs a term policy. There are many other factors to consider when deciding on a life policy as well as other associated risks depending on the type you select.
If you want to discuss this topic further reach out to your Financial Planner or schedule time with one of ours. BOOK TIME HERE