Does your current insurance policy need to be updated to reflect changes in your personal situation and financial planning goals? Insurance needs change as your family, financial, and business needs change. Just as technology created new means of communication and streamlined old methods, new types of insurance programs sold by ethical
agents will match the most current features and updates to your changing needs. If a new product provides a more cost effective solution than your old product, then you may consider exchanging the old policy for a new one.
Federal income tax law facilitates certain exchanges by providing
that in some instances they may be made without the immediate recognition of gain. Although such transactions are
sometimes referred to as “Section 1035 tax-free exchanges” the gain at the time of the transaction is not forgiven
but is deferred rather than recognized as an immediate taxable event. If you decide that a 1035 exchange is a right strategy for you, be
careful - you don’t want to trigger unwanted consequences so make sure that you understand all of the rules before you
engage in such a transaction. An insurance licensed advisor, retirement distribution specialist or tax professional
can help you determine whether a Section 1035 exchange may be appropriate for you.
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