Q. What are the tax benefits of life insurance?
A. There are two major tax benefits of life insurance:
1. The death benefit of a life insurance received by the beneficiary is not treated as taxable income.
2. The cash value build up, if there is any, in life insurance is tax deferred during the policy owner's life time, and can be borrowed or collateralized without tax consequence, and is tax free if received as a result of the insured's death.
However, if a life insurance policy is deemed as a MEC, the total accumulated income would be subject to ordinary income tax.
A. There are two major tax benefits of life insurance:
1. The death benefit of a life insurance received by the beneficiary is not treated as taxable income.
2. The cash value build up, if there is any, in life insurance is tax deferred during the policy owner's life time, and can be borrowed or collateralized without tax consequence, and is tax free if received as a result of the insured's death.
However, if a life insurance policy is deemed as a MEC, the total accumulated income would be subject to ordinary income tax.
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