Life insurance coverage is a great way to give your family a sense of financial security in the event that you pass away. If you are already covered under a term life insurance policy that you are unhappy with, it might be a good idea to switch to a different type of coverage. However, switching a life insurance plan isn't always an easy task, and it could also lead to you having to spend more money for coverage. One of the options that you can consider is 1035 exchange life insurance. Below, there is helpful information in regards to 1035 exchange life insurance that will help you decide if it can meet your needs.
1. Consider the Tax Break Involved
One of the things that can happen when switching a life insurance policy is having to pay taxes. The amount of taxes can vary depending on the specific life insurance policy that you are switching to. However, if you opt of 1035 exchange life insurance, it is actually a good way to avoid paying taxes on the new policy. The reason why is because 1035 exchange life insurance isn't just a new policy, it is simply a tax code. The code basically ensures that certain aspects of a life insurance policy are not seen as being taxable income, such as if you received a loan under your current policy that was paid in full.
2. Take Advantage of a Lower Premium
When you opt for a 1035 exchange life insurance policy, you will have the ability to search around for a lower premium. If you fell into bad financial situation since you first obtained the current policy, finding a new type of coverage can make your situation easier to cope with. If your current premium amount isn't an issue, 1035 life insurance can still be useful. For example, you can opt for coverage that is permanent rather than having to worry about your term life insurance policy ending. Whole life insurance is permanent coverage that comes with numerous benefits, such as being able to accumulate a cash value as you pay the monthly premiums.
3. Don't Worry if Your Health Has Deteriorated
You should be able to take advantage of 1035 life insurance even if your health has fallen into worse shape since your current policy began. Simply find a new insurance company that is willing to accept your health condition. The only thing that you should be prepared to do in such a situation is possibly have to pay a higher premium amount. However, you will still get to take advantage of the tax break during the exchange of policies.