Life insurance is often portrayed as an unselfish form of contingency planning for the insured person's family. Life insurance can also be used to provide tax free Income for the insured person.
This can be achieved through a technique called leveraged life insurance, which involves using the cash value of an insurance policy as collateral against which a bank loan or series of bank loans can be obtained. The proceeds of the loan are tax free. At death, the loan is repaid from the insurance proceeds, with the balance passing to the heirs.
