Tax-free Exchange Of Insurance Products
Under Section 1035 of the Internal Revenue Code, stipulation that the exchange of one life insurance policy for another life insurance policy will generally not result in a recognized gain for the purpose of federal income tax purposes to the policy owner who exchanges the policy. The insured must be the same person under both policies. If the policy owner should surrender the second policy in a taxable transaction, the untaxed gain is then recognized. The types of policy exchanges that can be made on a tax-free basis are as follows: (1) a life insurance policy for another life insurance policy; (2) a life insurance policy for an annuity contract; and (3) an annuity contract for another annuity contract. An annuity contract cannot be exchanged on a tax-free basis for a life insurance policy. The annuitant must be the same person under both annuity contracts in order to maintain the tax-free basis.
Popular Insurance Terms
Voluntary market conduct compliance organization whose purpose is to protect the public interest and to enhance the insurance buyer's perception of the life insurance instrument. The member ...
Liability policy that covers all liability exposures for a large group that has something in common. For example, wrap-up insurance can be written for all the various businesses working ...
Single contract coverage on a group basis issued to an employer. Group members receive certificates as evidence of membership summarizing benefits provided. ...
Method of funding a pension plan through: an individual level cost basis, where future benefits for the employee are estimated and contributions are made periodically while the employee is ...
Coverage for the federal government in the event of loss due to dishonest acts of federal government employees. ...
Coverage in health insurance by two or more policies for the same insured loss. In such a circumstance, each policy pays its proportionate share of the loss, or one policy becomes primary ...
Independent, nonprofit, membership medical-surgical plan. Benefits cover expenses associated with medical and surgical procedures. The physician and/or surgeon bills the Blue Shield plan ...
Additional amount of accidental death and dismemberment insurance not provided by the employee benefit plan (standard group life plan) that may be chosen by the employee. Generally, the ...
Proportion of losses incurred to premiums earned. This ratio indicates the amount of a premium dollar that is being consumed by losses. ...
Have a question or comment?
We're here to help.