The Times They Are Exchangin’Julie Brooks
The title’s allusion to folk music is appropriate when you consider that the results achieved by exchanging coverage might be music to the ears of a lot of folks!
Not since the “flight to quality” during the 1990s have there been conditions in the economy and the industry that could serve as such strong possible motivation for policyholders to move coverage from their current carrier to another.
- Ongoing market conditions continue to savage many VUL policies.
- The Pension Protection Act has made the jump from traditional policies to LTC-linked products non-taxable.
- Many small and large estate plans no longer need cash value building products and would benefit from a transfer to guaranteed UL-type coverage which is currently priced at bargain premium levels.
- As conversion options dwindle for level term products, now may be the time to either convert or exchange to another carrier’s permanent coverage if underwriting is available.
As always, compliance with IRC section 1035 can take the tax bite out of the process.
Common questions attend the feasibility of a non-taxable exchange:
- What types of products will qualify?
- What if the existing policy has loans?
- Are there any MEC considerations?
- Can withdrawals be made at the time of an exchange?
- What if there is more than one insured involved?
- What if several policies are being exchanged?
Call us with any concerns that may arise and also help you find the best product to serve as your clients’ landing place for their next exchange.