Time To Trade In Your OLD Life Policy?
A lot of folks have an old life insurance policy that they’re not sure how to feel about. Maybe the policy was purchased for them by a grandparent when they were a child, or perhaps they applied for it themselves a decade or more ago, and simply haven’t kept up with its performance as well as they would have liked. These circumstances can leave clients with a nagging “locked-in” feeling with regards to their life coverage, while also wondering if there are more effective products out there that they should be taking advantage of instead.
As with any other products, life insurance policies are constantly evolving. Modern features like Living Benefits and Guaranteed Income Riders, as well as myriad changes to the way cash value accumulates and how policies are credited with regard to the markets, are now available on today’s policies. It’s very possible that a policy that was state-of-the-art ten years ago has since been surpassed by newer, better products with stronger upside potential, better features, more guarantees, or lower fees.
So what options does a client have if they want to look into modernizing their old policy to take advantage of better products? We have noticed that many of our clients don’t think they have any – they assume that their policy is locked in stone, and getting a new policy would be essentially “starting over”. That couldn’t be further from the truth!
1035 exchanges were designed by the government to protect the consumer by specifically addressing this situation. To put it simply, the IRS allows clients to exchange their current life insurance policy for a new one, without being required to pay tax on the gain. The new policy must have the same insured and owner as the old policy, and the client may have to submit to new underwriting procedures as part of the exchange process, but the advantages of using a 1035 exchange to optimize your life insurance coverage could be enormous. Imagine being able to transfer all of your cash value from your old policy over to a newer, stronger policy with the most cutting-edge features and earning potential.
1035 exchanges don’t make sense for everyone, however. If your current health isn’t good, or has gotten worse since you qualified for your original policy, the negative impacts of a lower health rating might outweigh the positive effects of a 1035 exchange. You’ll want to make sure you work with a trusted, knowledgeable, experienced life agent who can find the products that will provide the greatest overall benefits. Just because a product is newer doesn’t necessarily mean it’s better. Make sure you choose an agent that knows his/her stuff. Good News is, you’re at the right place.