A life insurance 1035 exchange takes the cash value in your current life policy and rolls it over into a new policy. There are tax considerations, but the primary reason would be to reduce the new policy’s premiums. Go here for further explanation.
Example: female, age 62, preferred non tobacco, $24,800 cash value accumulation, fully underwritten new policy
$100,000 benefit: 1035 exchange $24,800
$244.25 annual American General “Value+ Protector III IUL” age 90 no-lapse guarantee*
$475.00 annual company #2, age 120 no-lapse Guarantee IUL
$614.00 annual company #3, age 121 no-lapse Guarantee UL
$100,000 benefit: (without the 1035 exchange)
$1,485.01 annual American General “Value+ Protector III IUL” age 90 no-lapse guarantee
$1,941.00 annual company #2, age 120 no-lapse Guarantee IUL
$1,749.00 annual company #3, age 121 no-lapse Guarantee UL
The choice is whether to opt for a 1035 exchange or not. The 1035 will structure in lower premiums. The alternative is to directly take the cash surrender value, set it aside in an account to offset premiums, or use the lump sum cash for whatever discretionary purpose.
Contact me for a free policy review and quotes
*Note: one can set American General’s “Value+ Protector III IUL” no-lapse guarantee (NLG) to age 91, 92, or whatever, up to age 100. Below are age NLG 100 quotes. These premiums are higher than the company #2 and #3 age 120 no-lapse guarantee, but American General’s IUL product builds cash value, has a non-guaranteed side that projects it carrying out much further, and has partial return of premium options in year 20 and year 25. The age 90 NLG structure runs strong enough on the non guaranteed side to make it sufficient on its own merits.
$1,082,12 annual $100,000 benefit age 100 no-lapse guarantee, 1035 exchange $24,000
$2,022.34 annual $100,000 benefit age 100 no-lapse guarantee, (no 1035 exchange)