Leverage A Small Cash Value Policy To Buy More Death Benefit
Young parent has an old whole life insurance policy purchased when he/she was a child. The death benefit is not enough to meet the current life insurance needs of a parent with growing children.
Use the cash value in the old, low face amount life insurance policy to purchase Colony Term UL via a 1035 exchange. Although its cost is as affordable as term, Colony Term UL is universal life insurance. Clients can leverage its flexibility to purchase a guaranteed death benefit with a single payment.
The length of the death-benefit guarantee1 will depend on the amount of 1035, the specified amount of coverage and the age and health of the insured. However, with costs as affordable as the Colony Term UL policy’s, even modest amounts of cash value from an old, out-of-date policy, may help purchase a significant death benefit for 10, 15, 20, or 30 years.
John and Mary are the parents of two small children. Both have careers and they recently purchased their first home, based on both incomes. They recognize they need life insurance to help protect the family should either of them die prematurely. They contact their insurance broker to discuss purchasing life insurance to supplement insurance they already have from their employer.
Two small whole life policies are among their existing policies. John has a policy with a death benefit of $50,000 that his grandmother bought for him. It currently has about $17,562 of cash value. Mary has an old policy for $35,000 with about $13,900 of cash value.
John is age 35 and Mary is 34 and both are in excellent health. They’re interested in 30 years of coverage. John and Mary recognize that these cash values will only provide the death benefit guarantee for 30 years. If their life insurance needs extend beyond that period, their insurance premiums will increase significantly. Their broker shows them how to leverage these small policies into coverage that will provide significantly higher death benefits. Moving the cash value from both policies to new Colony Term UL 30 policies via a 1035 exchange will provide John a death benefit of $981,641 and Mary a death benefit of $962,970.