To Love Cash-Value Life Insurance
Cash value life insurance policies have a savings or investment component that allows policyholders to accumulate cash value over time. This cash value grows on a tax-deferred basis, providing a vehicle for wealth accumulation. Policyholders can access this cash value through policy loans or withdrawals, providing a potential source of funds for various financial needs.
The cash value growth in a life insurance policy is tax-deferred, meaning policyholders generally don't pay income taxes on the accumulated value unless they withdraw more than they've paid in premiums. Additionally, death benefits are typically paid out tax-free to beneficiaries. These tax advantages can make cash value life insurance an attractive option for certain individuals seeking tax-efficient ways to grow and transfer wealth.
Unlike term life insurance, which provides coverage for a specific term, cash value life insurance offers permanent coverage for the entire lifetime of the insured, as long as premiums are paid. This longevity can be advantageous for individuals who want to ensure that their beneficiaries receive a death benefit regardless of when they pass away.
Cash value life insurance can play a crucial role in estate planning. The death benefit can be used to provide liquidity to cover estate taxes, ensuring that heirs are not forced to sell assets to meet tax obligations. It can also be structured to create an inheritance for beneficiaries or contribute to charitable giving goals, offering a versatile tool for individuals with specific estate planning objectives.
“People who buy annuities, it turns out, live longer than people who don’t, and not because the people who buy annuities are healthier to start with. The evidence suggests that an annuity’s steady payout provides a little extra incentive to keep chugging along.”
— Steven D. Levitt