Wednesday, April 22, 2009


Insureds Swap Life Insurance Policies, Hold Onto Annuities

Life insurance holders are opting to trade in their old policies for new, better designed or more conservative policies issued by companies in solid financial health these days. But they’re holding on to their variable annuity contracts, as buying new ones in the midst of a big equity market decline might result in a decline in principal. Plus issuers are raising fees and cutting back on benefits. Indeed, tax-free 1035 exchanges of life insurance policies are rising, while the pace of 1035 exchanges for variable annuities has slowed.

Data is hard to come by, but industry experts estimate that over 15 percent of all life insurance sales are due to exchanges, up from 12 percent ten years ago. The 1035 exchanges are particularly popular for universal life insurance with death benefit guarantees, says Howard Drescher, spokesperson for LIMRA. Meanwhile, 40 percent of variable annuity sales were triggered by 1035 exchanges in 2008, down from 50 percent in 2005, says Frank O’Connor, manager of Morningstar’s Variable Annuity Research and Data Service, in Chicago...

Registered Rep: Insureds Swap Life Insurance Policies, Hold Onto Annuities

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