Having life, disability, and critical illness insurance is incredibly important if you want to protect your family, yourself, and your assets against potential unforeseen major life changes and disruptions like death, sickness, or injury. Insurance provides you with a safety net and peace of mind during challenging times, and it can also offer tax savings strategies that you may not be aware of.
Investing in Insurance as a Tax Savings Strategy
When you have participating whole life insurance, or PAR, you likely make monthly payments towards your insurance plan. Consider contributing an additional amount of money to your insurance plan as a way to invest and earn tax free returns on those investments.
You can use your tax free investment earnings to pay for your insurance premiums, saving you money while you invest it. When you invest in insurance, you also create an additional source of funds that can be drawn on if needed. This is in addition to your insurance coverage. The money you invest in addition to your premiums offers you long-term financial growth and security.
Tax Deductions on Insurance Investments
Typically, insurance premiums are not tax deductible unless you have a loan agreement that requires you to have life insurance. The investments you make in insurance products, however, grow tax free, and you only pay tax on the gains you achieve if you withdraw money early. Proceeds from insurance are tax free in most cases.
When Should You Invest in Insurance?
If you have cash available to invest, you should consider investing it in insurance as one of your options. This is especially worthwhile if you are a business owner as transferring money out of your company and into a life insurance policy will reduce your company’s annual taxable income and provide other tax planning benefits.
When Should You Get Life, Critical Illness, and Disability Insurance?
Life insurance, critical illness insurance, and disability insurance can be implemented at anytime to protect you and your family from potential future events like death, sickness, or injury. It’s never too early to have insurance in place, and sooner is definitely better than later. The premiums you pay on your insurance increase with your age and are based on your age when you first acquire insurance. Insurance is harder to obtain when you have existing medical conditions or if you’re considered to be at greater risk of developing them.
Life is unpredictable and we all face challenging times at some point. Having insurance will protect you and your loved ones, offering security in the event of job or income loss due to death or major illnesses or disabilities. When you choose to invest in insurance as a tax strategy, there are many advantages.
Support for Navigating Insurance and Related Tax Savings Opportunities
It can feel overwhelming to navigate all the options when it comes to insurance and to determine the best way to take advantage of potential tax savings opportunities. KWB Accountants & Advisors is here to help you make the best decisions for you and your family based on your unique goals and circumstances. We work with other exceptional experts to provide you with comprehensive, thorough, and proactive advice and guidance to offer you peace of mind and practical solutions.
To learn more about becoming a KWB client, book an introductory meeting here.
