1. Tax-free death benefit
Both term and permanent life insurance policies provide a death benefit, which is generally paid to the beneficiary free of federal income tax and offers a tax-efficient way to make sure your family has the resources to help:
- Maintain their standard of living
- Pay off mortgages or other debts
- Carry out education plans for your children
2. Tax-deferred cash value growth
With permanent life insurance, your premium not only funds a tax-free death benefit, but a cash value account that grows tax-deferred, as long as the policy remains in force. That means, until a withdrawal is made, you will not owe taxes on the growth of your policy’s cash value, allowing you to potentially accumulate more savings over time.
When used as part of a retirement income strategy, this could be especially beneficial to those in a higher tax bracket during their working years who expect to be in a lower tax bracket during retirement when withdrawals are made.
3. Tax-advantaged withdrawals
Similar to a Roth IRA, permanent life insurance allows you to access the cash value of your policy through tax-advantaged loans or withdrawals1. This provides you greater flexibility to use your funds as you see fit and can be used to help:
- Supplement your retirement income
- Pay for unexpected medical bills
- Prepare for future expenses like funding an education
It’s also important to remember that any loans and withdrawals from the cash value of your policy may affect the death benefit amount and may require the need for additional premiums.
The bottom line
Whether you want permanent death benefit protection, financial protection against a major health event or supplemental retirement income, your life insurance policy can potentially help provide these valuable benefits in a tax-efficient manner.
 If you choose to take loans or withdrawals, the cash value and the death benefit payable to your beneficiaries will be reduced. Surrender charges may apply for early surrenders and partial surrenders. Surrenders may be subject to income tax.