If you hold a cash value life insurance policy, it should be re-examined about once every five years, when you’re under 50, to see how it’s performing. After age 50, policies should be looked at more frequently until you reach 60, when this should become an annual review. Ask your insurance company for an “in-force ledger,” to check on the current state of the policy.
The goal of such periodic appraisals is to spot any underfunding as soon as possible. If that’s the case, you might want to pay additional premiums or reduce coverage. A tax-free exchange for an annuity (permitted under Section 1035 of the tax code) can be another solution if you no longer need the life insurance.
That is, exchanging an unwanted life insurance policy for a fixed or variable annuity might enable you to receive a stream of income. Before you make such a trade, though, find out if you’ll owe surrender charges on the life insurance policy.
