For Mark Roberts’ Use: We think of life insurance as a relatively modern innovation, but some form of it has been around since the days of ancient Rome! The original purpose was to protect a worker’s dependents from financial ruin in the event that something happened to him (usually a husband and father). But of course, society has changed quite a bit since those days, and rapidly over the past 100 years. New types of life insurance have emerged in response to the changing needs of family structures and financial situations.
If you bought your life insurance policy years ago, you might be surprised to find that it no longer suits your needs very well. In fact, we recommend that you perform a new needs analysis every few years for this exact reason. You might find that you need more insurance than is provided by your current policy, or that new types of benefits are available.
The bottom line is that your life insurance should fit your life. And life tends to change, doesn’t it?
If you do decide that your old policy just doesn’t cut it, what should you do next? You might be surprised to learn that you aren’t at all “stuck” with that old policy! In most cases, it is possible to cash out your old policy and exchange it for a new one that better suits your current lifestyle and financial situation.
That’s the good news. The bad news is that conducting a 1035 exchange (the technical name for this maneuver) can be tricky. If you don’t conduct the exchange according to very precise regulations, you could end up owing surrender charges from your old policy, or sales charges on your new policy.
The point of a 1035 exchange is to swap out an old life insurance policy for one that better fits your needs, without incurring income taxes on the cashed-out policy. We can help you conduct this maneuver correctly, so that you protect both your current and future financial interests. Just give us a call and we’ll get started with your current needs analysis, and then help you swap over to a life insurance policy that offers better protection to your loved ones.