Tax Free Life Insurance Benefits

Tax Free Life Insurance benefits are but one reason that term life insurance products are such a great deal. But why do so many consumers choose to buy life insurance over other types of similar products? What are some key features of term life insurance that you need to know about? In this article, we will discuss how tax free life insurance benefits affect you, how it could change, and what features you need to be aware of.

More about the tax free life insurance benefits

You may or may not have known this, but a tax free life insurance benefits exist on both the state and federal level. As a result of the tax free life insurance feature, life insurance coverage is much easier to plan with due to the fact that you do not have to consider current and potential future tax rates. For example, if you had a million dollar plan, and you passed away, your family would currently receive every penny of the benefit without taxation. As a result, you would not have to get 28% more insurance if you were in the 28% tax bracket, thereby essentially saving you 28% on your premium if this feature was not part of the life insurance tax code.

Tax Free Life Insurance Benefits and Estate Planning

Another key component of having tax free life insurance benefits is the fact that you can use life insurance as an estate planning tool. Currently, you are taxed at nearly a 50% level on the amount over about 2 million dollars in your estate if you were to pass away. As a result of tax free life insurance benefits, you can take out a policy to cover the estate tax in it’s entirety to prevent your legacy from becoming eroded.

Could Washington start Taxing Life Insurance Proceeds?

However, due to the fact that our country is in a financial pinch, there have been rumblings and grumblings out of Washington D.C about taking away the tax free life insurance benefits that we currently enjoy. Many lawmakers simply can’t help but place a bullseye on this feature, as it would be one of the largest new sources of revenue if the tax code for life insurance were changed. However, right now tax free life insurance benefits are still relatively safe, but given Washington’s attitude towards taxation, I wouldn’t be surprised if this was soon in danger.

Tax Free Life Insurance Benefits are another reason that life insurance is a good deal

As previously mentioned, the tax free life insurance benefits are yet another reason why you should be sure to take advantage of having a life insurance policy. After all there is no telling when the government could change its stance, and take away this valuable feature. However, until that time, we can all continue to enjoy tax free life insurance benefits.