What are the tax advantages of life insurance?


If structured properly, life insurance pays a tax-free death benefit. In addition to that, has tax deferred cash accumulation while also providing tax-free income down the road. Every dollar that's invested in a traditional investment will have some level of capital gains tax. Hypothetically, if you earn a 10% gain in a traditional investment and there's a 20% cap gains tax, that means your after-tax gain is actually 8% because you paid 20% in taxes. If that same traditional investment was inside a properly structured life insurance policy, you would both earn and realize the entire 10% because there will be no capital gains tax due. Not having to pay that extra 20% of capital gains tax year after year really adds up over time.