The investment in life insurance provides financial protection for a family. If the covered individual dies while the policy is in place, this policy pays out money to the listed beneficiary.
Having this policy can offer some key benefits, too. Specifically, it can often offer tax benefits. Speak to your life insurance agent. Also speak to your tax professional. Be sure you know the risks and potential benefits.
When Does Life Insurance Offer Benefits?
Some types of life insurance will offer benefits both during your lifetime and after. Permanent life insurance often does this. Other policies may offer benefits, too. Let's take a look.
Your Loved Ones Do Not Pay Taxes
This type of insurance lets you transfer the policy's death benefit (payout) to the person you list. When this happens, at the time of your death, the person usually receives the full amount. It does not matter how much this is. There are no taxes on this death benefit. The funds often transfer very quickly, too. The individual receiving them does not pay income tax either. That is one of the largest tax benefits that life insurance offers.
Investment Dollars Are Not Taxable Income
Another key benefit to look at is your investment dollars. Some policies allow you to borrow from them from time to time. Others pay you dividends. However, the money you invest in life insurance is usually not taxable later. You do not pay taxes on these funds in the future.
The earnings that grow within the life insurance policy do so with little risk. They do so without any taxation as well. For example, if you put money into a savings account, the earnings you receive are a type of taxable income. You pay taxes on what you earn. The money you put into life insurance is not taxable. It grows throughout the lifetime of the policy. You never pay taxes on those funds.
From these vantage points, life insurance is a tax break to consider. If you are thinking about life insurance, speak to your agent about your options. Find a policy that works for your unique needs. Figure out the policy's specific task benefits. But, focus on all of the benefits of these policies. The tax benefits are just one of the benefits to think about when buying coverage. You also get to provide your loved ones with financial protection. Of course, always be careful when filing your taxes, and speak to your insurance agent about any special filing requirements. Call us today for a Florence SC life insurance quote at 843-519-2557.