What else can life insurance do for you?
Some policies give you accumulation potential.
Some types of life insurance apply a portion of your premium payment to your policy’s cash value, which accumulates as you make additional premium payments. You also have the potential to earn interest at the end of each policy year, and any interest you earn grows tax-deferred.
After a period of time specified by the policy, you may be able to access this cash value through policy loans or withdrawals.1
Life insurance can provide supplemental retirement income.
Some people “over-fund” their policy for the best cash value accumulation potential. Then, after they retire, they draw supplemental retirement income from their policy’s cash value through policy loans or withdrawals.2
Consider the potential tax advantages.
Your policy’s cash value can grow tax-deferred, which may help it accumulate faster. You won’t have to pay taxes on your policy’s cash value accumulation unless you take a loan or withdrawal from your policy – and in some cases, not even then. (You can access your policy’s cash value income-tax-free and penalty-free through loans and withdrawals if the policy is not a modified endowment contract [MEC].2 Ask for more information, if this applies to you.)
Your policy’s death benefit is also tax-free for your beneficiaries. Should they receive a death benefit down the road, they won’t have to pay income taxes on the proceeds from your policy.
1Policy loans will reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax.
2Please note that loans and withdrawals under a MEC are taxable to the extent there is a gain in the contract and, if taken prior to age 59½, a 10% federal tax penalty may apply. In any case a gain in the contract is taxable if you surrender the policy.
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