What tax benefits are associated with Variable Life Insurance?

Variable Life Insurance offers significant tax advantages, making it an attractive option for many policyholders. The cash value component of a variable life insurance policy grows on a tax-deferred basis, meaning that the growth in cash value is not subject to income tax as long as the policy remains in force. Policyholders can leverage this growth for various financial needs without facing immediate tax consequences.

Additionally, upon the death of the insured, the death benefit paid to the beneficiaries is typically received income tax-free. This means that the full death benefit amount goes to the beneficiaries without any tax liabilities, providing a valuable benefit to those who are financially dependent on the insured.

These features combined highlight the favorable tax treatment associated with variable life insurance. This is a key reason why it is often used for estate planning, wealth transfer, and as a means of providing financial security for loved ones. Other options listed do not accurately reflect the tax benefits associated with variable life insurance, which is why they are less reflective of the advantages offered by this type of policy.