Life Insurance
At Net Financial, we guide you through understanding how life insurance can serve as a vital component of your comprehensive financial plan.
Tax Advantages of Life Insurance
When planning for the future, understanding the tax implications of your investment choices is crucial. Many individuals enter retirement expecting full access to their savings, only to discover a significant portion is lost to taxes. At Net Financial, we know every dollar counts. That’s why we help clients explore the meaningful tax benefits that life insurance products can provide.
One of the most notable benefits of life insurance is that the death benefit is generally exempt from federal income tax. This payout is typically delivered in a lump sum and received tax-free by beneficiaries—minus any outstanding policy loans or accrued interest.
Tax-Deferred Cash Value Growth
Life insurance policies that accumulate cash value offer another key benefit: tax-deferred growth. As long as your premium payments exceed the policy’s cost and fees, the cash value grows with credited interest—without immediate tax consequences. Life insurance is among the few financial tools that allow you to defer taxes while building wealth.
In many cases, you can borrow against your policy’s cash value without triggering taxes, provided your policy is not classified as a Modified Endowment Contract (MEC). Withdrawals remain tax-free until the amount withdrawn exceeds the total premiums you’ve paid (known as your policy basis). However, if the policy lapses or is surrendered with outstanding loans, the loan amount could be considered taxable income if it exceeds the policy basis.
Switching Investments
Life insurance offers several other unique tax advantages:
•You may access funds before age 59½ for retirement purposes without penalties, if done according to IRS guidelines.
•You can reallocate investments within the policy without incurring capital gains taxes.
•Distributions from the policy typically don’t increase your taxable income, making it a strategic option for managing overall tax exposure.
Life insurance can serve as a valuable complement to traditional retirement and savings accounts. While the tax benefits are substantial, it’s important to understand how these advantages apply to your specific financial situation. We strongly recommend discussing your strategy with a qualified CPA or tax advisor in coordination with your financial professional.
At Net Financial, we're here to help you make informed decisions that support your long-term goals.
We're dedicated to helping you maximize the value of your life insurance policy while taking the right steps to safeguard your family's financial future.
Get In Touch
Digitas Global, LLC dba Net Financial is a registered investment adviser with the Texas State Securities Board. Registration does not imply a certain level of skill or training. A copy of our current Form ADV Part 2A (Firm Brochure) discussing our advisory services, fees, and other important information is available upon request or at the SEC's investment adviser public information website www.adviserinfo.sec.gov. As a registered investment adviser, Digitas Global, LLC dba Net Financial has a fiduciary duty to act in the best interests of our clients at all times. Our fee structure is based on a percentage of assets under management. Detailed fee information is available in our Form ADV Part 2A. Past performance does not guarantee future results. All investments involve risk, including the potential loss of principal.
Net Financial may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The information provided on this website is for general informational purposes only and should not be construed as personalized investment advice. Consult with a qualified financial advisor before making any investment decisions. Our firm has adopted a Code of Ethics to ensure we uphold our fiduciary duty to our clients. A copy is available upon request. Information about any disciplinary history for our firm can be found at the SEC's investment adviser public information website www.adviserinfo.sec.gov.
Contact Information:
Digitas Global, LLC dba Net Financial
24285 Katy Freeway, Suite 300, Katy, Texas 77494
Email: [email protected]
Phone: (346) 258-6100