Pay Less For Permanent Life Insurance

Many people own older whole life policies with cash value. However, most of these policies are designed to pay the face amount upon the policy holder’s death. For example, a $100,000 face amount policy with a cash value of $25,000 will typically pay $100,000. Because these policies are old, they use out of date mortality tables and were probably purchased without considering the effects of inflation over a long period of time.

Enter the “1035 exchange.” This is an IRS code section that allows for the tax-free exchange of money between insurance companies. This is important because it defers (or completely eliminates) the tax in certain instances. Assuming favorable underwriting using a universal policy with a guaranteed premium, the insured can use the old cash value to “pay down” the annual cost of a new policy.

Our life experience has shown premium reductions of 40% or more among older clients that utilize this technique.