When Is 1035 Exchange Appropriate?
There are a number of reasons why an 1035 exchange makes sense. Some life insurance products offer features and benefits like guarantees against lapse or new policy riders providing chronic illness coverage that were not available just a few years ago. Or, as the family, business, and financial status change, the insurance purchased to meet objectives may need to be changed. In some other cases, a new type of policy can meet the needs for insurance in a more cost-effective way.
Non-tax Factors to Consider
However, there are a number of NON-tax factors that should be considered before an 1035 exchange. The non-tax factors that should be considered include:
- New acquisition costs
- Possible surrender penalties
- Health status at the time of exchange