Under current Internal Revenue Service (IRS) and Canada Revenue Agency (CRA) guidelines, insurance policies receive many favorable tax advantages.

Tax-Free Death Benefit

Should the insured die, the entire death benefit including the cash value is income-tax free to the beneficiary.

Tax-Deferred Earnings

You do not pay taxes on gains in the policy. Tax is deferred until you decide to surrender the policy, the policy has lapsed, or when certain distributions occur.

Tax-Free Withdrawals

When the cash value in the policy is sufficient, premiums paid into a policy can be taken as tax-free withdrawals up to your cost basis in the policy. This is the premium you paid with after-tax dollars.

Tax-Free Loans

Besides the withdrawals, you can take more money out of the policy in excess of your basis (your paid premiums) through tax-free loans with a very low net effective rate.

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