Life Insurance Policies
An owner wishes to move the value of an old policy into a single premium whole life contract. What preserves the deferral?
Answer and explanation
Answer: A. A direct exchange between insurers under section 1035 avoids recognition of gain and carries the old basis into the new contract. Taking the proceeds in hand turns the transaction into a taxable surrender, and there is no sixty day rule for life insurance.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, single premium and 1035
More life insurance policies questions
- How does fixed indexed life differ from variable life in where the risk falls?
- How does group credit life differ from individual credit life?
- How does level term differ from decreasing term in the pattern of benefit and premium?
- How does the cash value of a continuous premium whole life policy behave over time?
- How does the cash value of a twenty payment whole life policy compare with that of continuous premium whole life issued at the same age?
- How does the death benefit of an increasing term rider or policy change over time?
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