Life insurance has long been a valuable estate planning tool. However, the cost of maintaining insurance for high net worth individuals at older ages presents significant challenges. Underperforming policies, due to low interest rates, combined with longer life expectancies, often put the annual outlay beyond a policyowner’s ability to maintain ongoing premium payments.
With SWAPP, Coventry First has created the option to transfer an underperforming policy’s market value into a new paid-up policy that can be based on either guaranteed or current rates. By tapping into the market value of the original policy, SWAPP provides more coverage than a traditional exchange — more than cash value would provide.
SWAPP presents tremendous new opportunities for policyowners. It enables them to truly optimize their coverage by providing a more appropriate policy while eliminating future premiums. As a result, clients can typically:
- Receive a paid-up policy based on market value.
- Create a guaranteed benefit in place of a non-guaranteed benefit.
- Retain a more appropriate level of coverage.
- Upgrade the credit rating of the insurer.
- Create additional disposable income by eliminating future premium payments.
SWAPP also signals a revolutionary shift in how life insurance assets are managed. Current nonforfeiture laws provide for: 1) surrendering the policy for cash or 2) exchanging it for a paid-up policy with a reduced face amount. Because both of these options are based on cash surrender value, they frequently undervalue the policyowner’s asset. As a result, there is a compelling need for paid-up benefits based not on cash value, but on market value.
With SWAPP, advisors can now have their clients’ policies appraised on the secondary market. In return they can learn what the policy is worth in cash and as a paid-up policy. Armed with this information, they can help their clients use their capital more efficiently.
Return to top
|
 |
|
|
