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SWAPP owes its success
to one simple idea: choice.
Life insurance has long been a valuable estate planning tool. However, the cost of maintaining insurance for older, affluent individuals presents significant challenges. Underperforming policies, due to low interest rates, combined with longer life expectancies, often put the annual premium outlay beyond what a policyowner chooses to maintain.
Still, the need for adequate coverage remains. Prior to the secondary market for life insurance, few options existed for consumers seeking to retain life insurance while eliminating premium payments. Nonforfeiture laws provide for surrender of the policy back to the life insurer for cash or exchange for a reduced paid-up benefit. Because both options are based on a value determined by the issuing life insurer, the policyowner's asset is frequently undervalued. The introduction of the secondary market enables policyowners to benefit from the market value of the policy, providing more value than a traditional exchange based on the cash surrender value.
In each of the following transactions, SWAPP makes it possible to eliminate premium payments while retaining a portion of the death benefit with no future premiums. Here are some examples of how SWAPP can be tailored to the policyowner's individual situation.
- The policyowner may receive a cash settlement in addition to retaining a portion of the death benefit.
- If a policyowner's need for insurance decreases over time, SWAPP can be designed to provide a decreasing death benefit.
The result is a revolutionary shift in how life insurance assets are managed. Instead of accepting the life insurers' nonforfeiture options, advisors can now have a client's policy appraised to determine the market value. The information provided by these appraisals helps policyowners use their capital more efficiently.