Life Assurance Facts & Questions

Individuals and Families

Can I exchange one Life Assurance policy for another?

In many cases, yes, if the ownership of the two policies is the same. You will need to go through new underwriting for the new coverage. And you may want to consider an exchange under Code Section 1035. 1035 Exchanges allow for a tax-free exchange of one Life Assurance policy for another.

How does taking money from my Annuity or Life Assurance policy affect my Social Security?

Money taken from an Annuity is considered earnings and is taxable as ordinary income and must be considered in determining taxation of your Social Security benefits. Money received from an Annuity that are a return on premiums paid, are received income tax-free and should not affect the taxation of Social Security benefits.

Can I use my Life Assurance policy cash value to help with buying a home?

Yes you can. You may have access to policy cash value through either a withdrawal or as a loan from the assurance company using the policy as collateral.

Should I purchase Life Assurance on my child?

The idea of buying Life Assurance for your child is something no one wants to consider because it forces us to consider the unthinkable. But purchasing a policy for a child isn't just about having financial protection if the unthinkable happens; it's about ensuring the child's financial future.

Do I need Life Assurance if I am single?

Whilst you may not have a spouse who is dependent on you, but what about other family members? Even if no one is dependent on you, you may want to consider purchasing Life Assurance to cover the repayment of debts, taxes, funeral and other final expenses.

Living Benefits

Will my beneficiary have to pay taxes on my Annuity?

Yes, beneficiaries will be taxed on the tax-deferred interest when they receive those dollars. However, if a beneficiary is the spouse of the owner and the owner dies, he/she may elect to continue the Annuity and postpone taxes.

Can I exchange one Annuity for another without paying taxes?

Yes you can. IRC Section 1035 allows for a tax-free exchange of one Annuity for another. Before you decide to exchange one Annuity for another, you will also want to consider any surrender charges that may be applied upon surrender of the contract as well as the new surrender penalty schedule for the new Annuity you plan to purchase.

Are income payments from my Annuity taxable?

Yes, if your Annuity was purchased through a qualified account, such as an IRA, 403(b) or 401(K), all payments will be subject to ordinary income taxes. If your Annuity was purchased with after-tax dollars, you will receive the earnings first, which are taxable as ordinary income.

If I accelerate my death benefit, will I receive the full death benefit?

No. The actual payment you receive will be less than the portion of the death benefit accelerated because the benefits are paid prior to death. Values are based on current interest rates, the age of the policy, and your age and health.

Am I too young to buy an Annuity?

The question you need to ask yourself is - “will I need to access the money before I am 59 ½?” Although you can take a distribution from an Annuity prior to age 59 ½, the distribution may be subject to a 10% premature distribution penalty. If you think you may need to access this money on a more short-term basis, an Annuity may not be the right savings vehicle for you.

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