How does tax efficient cash accumulation work in a life insurance vehicle?

Tax-efficient cash accumulation are only available in permanent life insurance policies, not in term life insurance. The premiums you pay into a permanent life insurance policy will cover the cost of insurance (which provides the death/chronic illness/critical illness coverage) and fees, and the rest is saved and grows in a tax deferred investment account. You can choose how the investment account grows and access the amount tax free after a certain number of years (typically 10-15) for any purpose. There is a penalty for accessing your cash amount before the specified number of years. Here are the tax codes that pertain to the tax-efficiency of life insurance in the U.S.: Death Benefits Policy death benefits are usually paid to beneficiaries income tax-free according to IRC Section 101(a). Benefits paid out before the insured’s death because of chronic or terminal illness are tax free according to IRC Section 101(g)1. Policy Cash Values Cash values can grow within the policy without being subject to taxes according to IRC Section 72. Withdrawals up to the amount of the policy owner’s tax basis are not subject to income tax according to IRC Section 72. Cash values exceeding the owner’s tax basis may be borrowed from the policy income tax free as long as the policy stays in force according to IRC Sections 72 and 7702 Tax-Free Exchanges The owner may exchange an existing for a new one free of income taxes according to IRC section 1035. The owner may exchange a life insurance policy for an annuity free of income taxes according to IRC Section 1035 Overall, life insurance death benefits, healthcare riders, and cash value can be accessed tax-free as long as the guidelines towards saving in the policy are followed appropriately. You can consult an Amplify licensed expert to make sure you are not exceeding the legal amount of cash in your policy to maximize your tax-free returns.