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Manage your life insurance for tax benefits

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in Small Business Tax,Small Business Tax Deduction Strategies

Life insurance is a worthwhile security blanket for well-to-do people. However, this protection can extract an unexpected tax cost for the unwary. But if you use the strategies outlined here, you may be able to avoid any dire tax consequences.

Know the life insurance basics

Essentially, life insurance is like a wager. You’re betting that you’ll die before coverage ends; the insurance company is betting that you won’t. (Or, if you do, it will have made enough from the premiums you’ve paid to pay off the death benefit and still come out ahead.)

In any event, life insurance can provide peace of mind. If you opt for a permanent form of life insurance, such as traditional whole life, your family will receive the death benefit at some point in time.

How much coverage do you need? That’s open to speculation, but most insurance pros recommend a death benefit of four to five times your annual salary.

Compare ‘perm’ to term

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