The IRS allows you to exchange an insurance contract for a new life insurance contract insuring the same person without paying tax on the investment gains earned on the original contract. This can be a substantial benefit. This is governed by Section 1035 of the IRS code and are called 1035 Exchanges.
This benefit comes with some important IRS guidelines:
- 1035 exchange code says that the old insurance policy must be exchanged for a new policy. You cannot receive a check and apply the proceeds to the purchase of a new insurance policy.
- A life insurance policy to another life insurance policy
- Life insurance policy to an annuity
- You cannot exchange an annuity contract for a life insurance policy
Reasons to Exchange:
- Flight to quality with a new carrier
- Improved Insurability…Meaning you stopped smoking or lost weight
- Better rate of return
- Ownership changes or problems
- Changes in your financial situation
- You currently have too many policies and want to consolidate
- Better features and benefits with a new policy
If you have a policy that you feel meets a reason for exchange, we can help you do a 1035 exchange and will not trigger any tax consequences for you. Contact Us. Ginn Insurance would enjoy helping you.
- We’ll help compare your current contract with other available options.
- Once you decide to exchange the contract, we can facilitate the completion of the new insurance company’s 1035 exchange and replacement forms, etc.