What are the advantages of a Life Insurance 1035 Exchange?
You may be able to lower your premium for the same amount of coverage by doing a life insurance 1035 exchange. Already stopped paying premiums on your old policy? Things may have changed since you stopped. Low interest rates may now require unexpected premiums to be paid. If you don't pay, you may risk losing the coverage before you die. Ask your old carrier to tell you how much longer you or your trust need to pay premiums. Next, compare that to the proposed 1035 exchange life insurance policy.
Higher death benefit:
Higher death benefit for same premium.
Consolidation of multiple policies into one makes administration and your life easier.
This is one of the newest benefits to arrive in the last five years and the single biggest reason life insurance 1035 exchange’s have become so popular. These riders make a lot of sense, particularly when the net cost of the new policy, including the rider, is less than your old policy. Be careful, though, definitions and design vary from carrier to carrier. Click on the jade colored title link in this paragraph.
Better rated insurance company:
Policies are only as good as the insurance carrier issuing them. If you are not with a well rated insurance carrier now, make sure the new policy is. Different states have different guarantees on the death benefit, but most go no higher than $300,000.
Some newer policies guarantee the premium all the way to age 120. No need to worry any more about low interest rates or underperforming cash values. On drawback to these guaranteed policies is that their Cash Value buildup may be slow and eventually drop to zero. However, unless you or your trust plan on using the Cash Values, the guaranteed premium makes a lot of sense.
Put your Cash Value to better use:
One of the problems with your old policy is that it will terminate if the Cash Value drops to zero. In other words, you are being forced to build up Cash Value. This adds to the premium. To make matters worse, when you die, the Cash Value may not be added to the death benefit. A life insurance 1035 Exchange makes better use of the old Cash Value by using it today, to purchase a more cost effective policy. One other interesting note: some newer policies do not require any Cash Values. The net effect is a lower premium.
Not paying premiums on your old policy?
A life insurance 1035 may still be advantageous. As an example, you could get more coverage, a Long Term Care Rider or guarantees that no further premiums are required. By the way, you may want to confirm with your old carrier that they continue to project no further premiums. You may be in for a surprise.
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