Most people think of life insurance as a way to protect loved ones with a lump-sum benefit in the event of the policy owner’s death. That is life insurance’s primary purpose; however, a permanent life insurance policy can offer much more. Consider the following features and benefits:
- Tax-free death benefit proceeds paid to beneficiaries
- Tax-deferred growth of interest earned on the portion of premiums paid that is applied to the cash value
- Competitive interest rates
- Higher contribution amounts are allowed, relative to IRA and 401(k) limits
- Should a policy owner let his policy lapse, he is still able to withdraw any money that remains in the cash value.
- A permanent life insurance policy owner has the ability to borrow against the death benefit of her policy through the use of policy loans.
- A policy owner who takes out such a policy loan may control the amount and frequency of repayments to his account; however, any outstanding policy loans and interest will reduce the total death benefit payable to beneficiaries and may cause the policy to lapse. Additional premium payments may be required to keep the policy in force.
- Permanent life policies offer a variety of rider options for an additional fee, such as accelerated benefits, creditor protection, guaranteed insurability and waiver of premium.
It’s important to remember that most life insurance policies are subject to medical underwriting, and in some cases, financial underwriting, and the costs of a life insurance policy, including premiums and any cost of insurance charges, is dependent on your age and health at the time of application. If properly structured, proceeds from life insurance are generally income tax free. Guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Additonal riders are not available on all life insurance products and may not be available in all states.
Neither our firm nor its agents or representatives may give tax advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.