If you've heard about how a Section 1035 exchange allows people to transfer money in a life insurance policy to new one without being liable for taxes, you might be wondering whether that provision could help you. Here are four times when you might benefit from a 1035 exchange.
Your Health Has Gotten Better
Did you buy your current policy when you were ill? Are you now feeling better? If so, your life insurance payment from month to month might be higher than it would be if you applied for a similar policy today. In a case like this, a 1035 exchange would be a simple way for you to get a new insurance policy that reflects your current health. You can simply transfer the money in the old policy to the new one.
You Need More Coverage
Perhaps you've had a new baby or your children have gotten married; whatever your reason for needing more life insurance coverage, you might be surprised at how much additional coverage might cost you. Luckily, when you use the 1035 tax exchange to transfer funds in your existing policy to a new one, you can add money to those funds to come up with a high initial payment for your new policy. As a result, your monthly payments might be much lower than the old policy; there may also be higher death benefits.
You Want a Policy with a Stronger Company
When you first bought your policy, you may have gone with a company that now seems to be on shaky financial ground. You might not be confident that you can count on that company to pay out benefits when the time comes, but you may worry that paying taxes for withdrawal would result in much less money for your beneficiaries. Because of that, you may still be with the unreliable company and you may be worrying regularly about what will happen.
Taking advantage of the 1035 Exchange can put your mind at ease, as you can transfer that money into a new policy with a more stable company without fearing that you'll need to pay taxes on it. Just be sure to research different companies and enlist the help of an insurance agent to help you find the best company for your new policy.
Now that you're better aware of how the 1035 exchange may be able to help you, start talking to a few life insurance agents in the neighborhood. They can give you personalized advice about whether you can be helped by using this provision.