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Life Insurance Options Later in Life

J Lack 2014
Jerry W. Lack, CLTC®, ChFC®
Vice President, Financial Advisor
[email protected]
(585) 394-4260 x41828

Did you buy life insurance years ago and just realize that you are still paying the same premium even though your lifestyle and family situation has changed?

The kids are grown and out of the house, you are retired and now living on a fixed income, perhaps today you are divorced or even widowed. Understand that there are several options for your old life insurance policies-do not be tempted to simply abandon the policy or surrender your life insurance coverage.

You do have an option to exchange an existing life insurance policy for a new life policy or another type of insurance product. This is known as an IRC Section 1035 exchange.

You must follow IRS rules when making this exchange; be careful not to incur unnecessary costs in completing the transaction.

If the premium cost of your current life insurance policy is an issue, you may be able to reduce the death benefit, lowering the premium cost in the process. You can also try to exchange your current policy for a policy with a lower premium cost but be careful as you will need to qualify medically for the new insurance.

You may be able to exchange the cash value of a permanent life insurance policy for an immediate annuity, which can provide a stream of income for a predetermined period of time or for the rest of your life. Each annuity payment will be apportioned between taxable gain and nontaxable return of capital.

Another potential option is to exchange your life insurance policy for a tax-qualified long-term care insurance (LTCI) policy, provided that the exchange meets IRC Section 1035 requirements. Any taxable gain in the cash surrender value is deferred in the long-term care policy, and benefits paid from the tax-qualified LTCI policy are received tax free.

How CNB Can Help

Personal Bankers are available to review old policies and recommend appropriate changes to meet new financial goals. We encourage you to contact us for an insurance review appointment.

Investments are not bank deposits, are not obligations of, or guaranteed by Canandaigua National Bank & Trust, and are not FDIC insured. Investments are subject to investment risks, including possible loss of principal amount invested. Investments and services may be offered through affiliate companies. Past performance discussed does not predict future results.

CNB Insurance Agency is a wholly owned subsidiary of Canandaigua National Bank & Trust. Investments and insurance products offered through CNB Insurance Agency are not FDIC insured, not bank deposits, not obligations of, or guaranteed by Canandaigua National Bank & Trust or any of its affiliates. Insurance Companies offering products through CNB Insurance Agency are independent of and not affiliated with Canandaigua National Bank & Trust, any of its affiliates, or CNB Insurance Agency. Canandaigua National Bank & Trust will not condition an extension of credit on either the consumer’s purchase of an insurance product or annuity from Canandaigua National Bank & Trust or any of its affiliates, or the consumer’s agreement not to obtain, or a prohibition from obtaining, an insurance product or annuity from an unaffiliated entity.