Universal Life Insurance. - An investment with guarantees combined with high death benefit

Transcription

1 Universal Life Insurance - An investment with guarantees combined with high death benefit May 2014

2 What is Universal Life Insurance? A recognized wealth planning tool in international private banking that combines liquidity planning with guaranteed insurance investments Flexibility Planning Protection Investment Planning Liquidity planning in case of death of a wealthy private client or a business owner Flexible estate and succession planning with individual beneficiary nomination Investment Guaranteed performance for life Not correlated asset diversification in USD Protection Asset protection provided by law Protection of family members future lifestyle Flexibility High death coverage Single or multi premium payment Individual plan modeling and ongoing adjustment 2

3 What are the key benefits of Universal Life Insurance? The benefits of Universal Life Insurance also include: High death coverage (insurance capacity) U.S. mortality tables / competitive insurance rates Products based on a stable currency Guaranteed minimum interests Market adjusted current interest rates Flexible premium payment schemes Access to funds if necessary Direct assets to chosen persons or organizations Policy issuance up to the age of 89 years Sophisticated trust and company structuring options Confidentiality Liquidity in case of death Safe and secure investment Guaranteed interest rates Safe and secure currency Confidentiality 3

4 When to purchase Universal Life Insurance? Personal protection needs Liquidity & Estate Preservation to fund for estate taxes and future lifestyle of dependents Wealth Equalization to equalize wealth of heirs and to balance liquid and non-liquid assets Multi-family Equalization or Family Equalization to transfer assets to a previous family Sovereign Risk Protection to protect one s assets from government confiscation or political uncertainty Wealth and Volatility Protection to purchase stable currency products to protect against economic volatility, loss of value in resident country currency and against inflationary pressures Business protection needs Buy/Sell Funding - to provide funding, when two or more partners own a business, for the transfer of a deceased partner s share to the other partners while providing immediate funds to the deceased s heirs equal to his portion of the company. Business Continuity - to protect against potential cash flow loss (due to loss of expertise) resulting from an owner s premature death. Key Person Insurance to provide financial aid to a business to cover lost revenue resulting from the premature death or disability of a person whose input into the business is key to its operation. 4

5 Who typically purchases Universal Life Insurance? Target client segmentation Target client profile Domestic Upper Affluent - Assets > CHF to CHF 2mn - Needs often satisfied by locally admitted life insurance solutions (domestic policies) - Concerned with estate planning related topics, including legacy distribution and tax issues High Net Worth Individual (HNWI) - Assets in excess of CHF 2mn - In addition to the above, needs could become more diversified and possibly requiring solutions other than domestically available ones Ultra High Net Worth Individual (UHNWI) - Assets in excess of CHF 20mn - Requirements as above, but often connected to multiresidency / international complexity in planning Any wealthy private client with liquidity needs in case of death Asset rich, cash poor balance between liquid and non liquid assets Entrepreneurs / business owners Target client domicile ASIA (well established, existing market) LATAM (high future potential) CEE (potential expected to grow over next 2 to 3 years) Europe (existing, but low penetration so far due to open questions related to taxation of UL-products) 5

6 How can the policy be designed? Typically, three flexible policy calculation models are available which are representing the individual liquidity and protection needs of the client. 5mn 3.5mn 1.8mn Guaranteed death benefit 1 2 M1 = Non-endowment Defined coverage with minimum premium required M2 = Endowment Asset growth equal death benefit 1.6mn 45 age 99 3 M3 = Investment Defined premium and coverage 6

7 What are the most relevant product parameters? When calculating an offer some relevant product parameters should be considered according to the client s financial and protection needs. I. 1 Level of face amount What level of coverage is the client looking for? What is the liquidity need in case of death? II. 2 III. 3 IV. 4 Endowment (savings) versus Non-Endowment (pure liquidity protection) Is the client looking for a highest possible surrender value or is pure liquidity / inheritance planning key to the client? Single versus multiple premiums Does the client favour a one-off-payment via single premium or is the funding option of using multiple premium payments more appealing to the client? Guaranteed versus current interest rates Should the offer be calculated with the interest rates that are currently applied or should it be calculated with the minimum guaranteed interest rates for life? 7

8 What are the price differentiations? Basic setting for calculation: Face amount USD 10mn, male, standard risk country, non smoker. Personal Setting 1 protection Freedom needs 10pay / guaranteed / endowment Age 40: 10p 3.6mn Age 50: 10p 4.8mn Age 60: 10p 6.2mn Setting 2 Legacy Current / endowment Age 40: SP 2.3mn / 5p 2.5mn / 10p 2.8mn Age 50: SP 3.3mn / 5p 3.6mn / 10p 4.0mn Age 60: SP 4.6mn / 5p 5.0mn / 10p 5.7mn Setting 3 Horizon Guaranteed / endowment Age 40: SP 4.9mn / 5p 5.3mn Age 50: SP 6.0mn / 5p 6.5mn Age 60: SP 7.2mn / 5p 7.9mn Setting 4 Ace Guaranteed & current non-endowment Age 40: SP 1.9mn / 5p 1.9mn / 10p 2.1mn Age 50: SP 2.9mn / 5p 3.0mn / 10p 3.3mn Age 60: SP 4.4mn / 5p 4.7mn / 10p 5.2mn Note: The insurance premium is defined on a approx. linear basis in relation to the respective face amount. 8

9 How are the products mostly financed? A number of methods are available to fund for the premium necessary for Universal Life Insurance. A common tool used is a bank loan provided by the trusted financial service provider of the client. Premium finance option Payments after death of policy holder 5mn 4mn Guaranteed death benefit USD 1.0mn bank loan Beneficiary option Bank A B C D 1mn age Advantages for the client Reduced cash needs to fund premium by using a loan from the financial service provider (bank) Full insurance coverage from day 1 All advantages provided by the policy (irrevocable) (rev) (rev) (rev) (rev) Advantages for the banks No/only limited loss of assets due to loan funding via bank Interest on loan provided to the client Income from Universal Life Policy via Broker Sticky assets / long term wealth management Access to next generation Guaranteed pay back upon death 9

10 Case study 1: Wealth equalization for future heirs using Universal Life Insurance Family & wealth Mr. Gonzales is aged 50. He has a wife aged 48, two daughters (aged 16 and 18) and two sons (aged 21 and 23). His total current wealth is estimated to be USD , of which USD are invested in bankable assets and USD are the value of his company. Mr. Gonzales has a regular income from his business and from the assets invested which covers his ongoing expenses. He therefore expects his net wealth to remain at the level of approx. USD over the decades to come. Planning need & envisaged solution In case of his death, Mr. Gonzales wishes to provide for his family as follows: the USD in liquid assets should go to his wife the company with a value of USD should go to his two sons additionally USD should go to his two daughters. In order to fund the USD for his two daughters upon his death, he needs to generate additional liquidity. His preferred solution is to buy an appropriate Universal Life Insurance policy. 10

11 Case study 1: Wealth equalization for future heirs using Universal Life Insurance Technical Product: ACE Face amount: USD Model: Non-endowment Premium: Single premium of USD Interest rates: Guaranteed at 2% Special feature: No-Lapse-Guarantee = The policy will not collapse, even if the surrender value during it s term will reach a zero value Expected wealth Without UL With UL Upon death Expected wealth upon death w or w/o Universal Life After 3 years After 10 years Company USD 10mn USD 10mn USD 10mn Liquidity USD 10mn USD 6mn USD 6mn Insurance surrender value USD 3mn Death benefit USD 14mn Total USD 20mn USD 19mn USD 30mn 11

12 Case study 1: Wealth equalization for future heirs using Universal Life Insurance Modified surrender value Surrender value Account value Death benefit Age Premium outlay Modified surrender value Surrender value Account value Death benefit 51 3'984'621 3'111'535 3'629'535 14'000' '063'069 3'550'268 14'000' '006'996 3'467'596 14'000' '957'004 3'381'203 14'000' '907'055 3'290'654 14'000' '805'840 3'157'240 14'000' '693'869 3'013'068 14'000' '538'682 2'857'881 14'000' '371'980 2'691'179 14'000' '219'954 2'511'153 14'000' '053'466 2'315'266 14'000' '867'895 2'011'295 14'000' '658'571 1'862'971 14'000' '425'461 1'600'461 14'000' '984'621 1'164'805 1'310'404 14'000' ' '183 14'000' ' '430 14'000' ' '821 14'000' '000' '984'621 14'000' '000' '000' '000' '000' '984'621 14'000' '984'621 14'000' '984'621 14'000' '984'621 14'000' '984'621 14'000' '984'621 14'000'000 12

13 Case study 2: Funding for cash needs for future heirs using Universal Life Insurance Family & wealth Mr. Zimmerman is aged 55. He is divorced with 3 children (aged 19, 21 and 24). After having sold his business, he is enjoying his wealth of around USD invested into several real estates, in art collections and classic cars. He recently bought a super-yacht in France, which his family is enjoying during their holidays. Mr. Zimmerman calculated that about USD is invested in non-liquid and about USD in liquid assets. The annual cash needed to pay for his children s education, to entertain the super-yacht and to cover ongoing expenses for his children and himself is equal to USD Planning need & envisaged solution In case of his death, Mr. Zimmermann would like to ensure that his children can finalize their education, keep the super-yacht and any other non-liquid assets. He feels that additional liquidity would be necessary and decides to buy an appropriate Universal Life Insurance policy which will generate the necessary liquidity so that his children will be left with at least USD in total liquid assets in order to fund their future expenses. He is convinced of the powerful option to use Universal Life Insurance as a liquidity generator. However, since life and habits may change, he is also looking at Universal Life Insurance as a secure investment providing the highest possible cash surrender value should he decide to cancel the insurance policy during its term. He wishes to spread the cost for the life insurance over a period of 10 years. 13

14 Case study 2: Funding for cash needs for future heirs using Universal Life Insurance Technical Product: Legacy Face amount: USD Model: Endowment Premium: 10pay premium of USD Interest rates: Current at 3.90% Expected wealth Without UL With UL Upon death Expected wealth upon death w or w/o Universal Life After 3 years After 10 years Company USD 60mn USD 60mn USD 60mn Liquidity USD 20mn USD 17mn USD 10mn Insurance surrender value USD 1.6mn Death benefit USD 20mn Total USD 80mn USD 78.6mn USD 90mn 14

15 Case study 2: Funding for cash needs for future heirs using Universal Life Insurance 22'000'000 20'000'000 18'000'000 16'000'000 14'000'000 12'000'000 10'000'000 8'000'000 6'000'000 4'000'000 2'000' Surrender value Account value Death benefit Age Premium outlay Surrender value Account value Death benefit ' '156 20'000' ' '430 1'777'830 20'000' '502 1'611'717 2'699'117 20'000' '502 2'557'325 3'644'725 20'000' '502 3'530'540 4'617'940 20'000' '502 4'608'302 5'623'102 20'000' '502 5'719'457 6'661'857 20'000' '502 6'868'122 7'737'922 20'000' '502 8'057'447 8'854'847 20'000' '502 9'289'859 10'014'659 20'000' '614'236 10'266'636 20'000' '941'090 10'521'090 20'000' '269'046 10'776'446 20'000' '597'832 11'032'632 20'000' '927'317 11'289'917 20'000' '521'693 11'521'693 20'000' '756'834 11'756'834 20'000' '997'214 11'997'214 20'000' '243'952 12'243'952 20'000' '498'248 12'498'248 20'000' '788'258 12'788'258 20'000' '077'014 13'077'014 20'000' '366'023 13'366'023 20'000' '652'836 13'652'836 20'000' '937'989 13'937'989 20'000'000 15

16 Case study 3: Funding of future tax liabilities using Universal Life Insurance Family & wealth Mr. Henri is 68, his wife 59 and their son 32 years old. After having sold his company some 5 years ago, Mr. Henri s total wealth amounts to USD whereof the major part of the cash generated is invested into real estate. The liquid assets available amount to USD During a recent conversation his tax consultant addressed the topic of inheritance tax (IHT). According to Mr. Henri s tax domicile he, or rather his wife and son, would be faced with an IHT rate of 35%. Under the current wealth situation an IHT of USD would be due (35% of USD ). Planning need & envisaged solution In case of his death, Mr. Henri would like to ensure that his wife and son will not have to sell some properties in order to pay for the IHT which will be due. His preferred solution is to buy an appropriate Universal Life Insurance policy at the lowest possible cost, with a death benefit that will pay for the IHT due. He expects his non-liquid assets to remain unchanged and his liquid assets to decrease by the premium amount payable for the envisaged Universal Life Insurance policy, which will be approx. USD for a death benefit of USD This will cover the IHT of 35% on his assets of USD minus USD

17 Case study 3: Funding of future tax liabilities using Universal Life Insurance Technical Product: ACE Face amount: USD Model: Non-endowment Premium: Single premium of USD Interest rates: Guaranteed at 2% Special feature: No-Lapse-Guarantee = The policy will not collapse, even if the surrender value during it s term will reach a zero value Expected wealth Without UL With UL Upon death Expected wealth upon death w or w/o Universal Life After 3 years After 10 years Company USD 14mn USD 14mn USD 14mn Liquidity USD 6mn USD 1.1mn USD 1.1mn Insurance surrender value USD 3.8mn Death benefit USD 8.2mn Total USD 20mn USD 18.9mn USD 23.3mn 17

18 Case study 3: Funding of future tax liabilities using Universal Life Insurance Enhanced surrender value Surrender value Account value Death benefit Age Premium outlay Enhanced surrender value Surrender value Account value Death benefit 69 4'922'439 4'010'145 4'454'585 8'200' '914'532 4'324'532 8'200' '804'492 4'185'792 8'200' '675'599 4'037'218 8'200' '534'598 3'877'357 8'200' '294'905 3'617'985 8'200' '023'323 3'326'723 8'200' '694'465 2'997'865 8'200' '320'193 2'623'593 8'200' '916'755 2'193'095 8'200' '443'825 1'692'284 8'200' '852 1'104'252 8'200' ' '241 8'200' '200' '706'000 8'200' '200' '200' '200' '200' '706'000 8'200' '200' '200' '200' '200' '706'000 8'200' '706'000 8'200' '706'000 8'200' '706'000 8'200' '706'000 8'200' '706'000 8'200' '706'000 8'200' '706'000 8'200'000 18

19 What information is required for an offer calculation? The following information is a MUST in order to calculate an offer in the illustration tools of the providers: Date of birth (or age) Gender Country and city of residence of the person to be insured Smoker or non-smoker Face amount or premium amount Premium payment frequency (e.g. single or multiple, for example 5- or 10- or other premium payment model) Model 1 (non-endowment), 2 (endowment) or 3 (investment) Interest rates to be applied in offer (guaranteed rates, current rates applied or other rates) The following information should be known as the providers have restrictions that apply: Location of offshore entity that will be the owner of the policy (must be one of the insurers approved jurisdiction ) Citizenship of the person to be insured and the owner (if it is an individual, which is possible for some products) The following information would be nice to have, but is not necessarily needed for a first illustration: If non-smoker, for how long has the person been a non-smoker? Should the death benefit be level or increasing (increasing not available on all products) At what age should the insurance goal be reached, e.g. for an endowment, should it be the maximum age (usually 100) or should it be at an earlier age? Is there a need for any additional benefits / risk riders? As much information as possible on the underwriting class criteria which would allow to make a first assessment of the risk class (standard, preferred, select) 19

20 How does the high level business process look like? The new business process requires the interaction of several stakeholders. With the support of a specialized broker, implementation can be significantly fostered. Meet end client with relationship manager Advisory process incl. - Information Disclosure & Authorization Form - Sample illustration - Medical Examiner Qualifications Form Information gathering - Filling out application with client - Collection of all information on source of funds, KYC, due diligence - Organize medical checks First insurer checks: - Insurer to review all information provided by broker - Insurer to review medical reports and questionnaires (no involvement of broker) Final information gathering for conclusion - Ownership structure - Ownership s required documentation - Application Form incl. identification docs & signed illustration Client relationship management - Receive policy document Policy issuance - Final policy documents Premium payment - Bank account holder verification - Information to insurer about premium payment to be received via wire transfer from approved account holder Final client acceptance by the insurer: - Compliance checks - Final medical check - Application document - Appendix documents Swiss Insurance Family Office with End Client Insurance Carrier Partner / Broker 20

21 Why choose Swiss Insurance Family Office as your trusted broker for UL? When providing Universal Life Insurance products to your clients, you should engage with a partner that can deal with the complexity of the topic in all respects! We are contractually connected as broker to the worlds most reputable providers We have in depth product knowledge, not only from a sales, but equally from a technical perspective which is key during the client s and partner s advisory process We are based in Switzerland and Liechtenstein, and therefore provide proximity to our partners and their clients We have a good understanding of civil- and common law in relation to international insurance affairs which is key when selling Universal Life to customers of any type We act as a single point of contact We do have a Swiss-, Liechtenstein- and EU-licence to advise clients in almost any insurance affairs. Although some market players claim that such licenses are not necessary to sell Universal Life to international clients, it definitely provides additional comfort and protection to clients and partners 21

22 Back Up 22

23 What product settings can be offered? Setting Personal 1 protection Our solution needs Freedom Strengths: 10 premium payments - guaranteed endowment 1 Lower face amounts (USD 5 35mn) 2 Endowment, high surrender value 3 Regular payment, 10 premium payments 4 Guaranteed interest rate calculation Specifics: Market Adjustment Value Setting 2 Our solution Legacy Strengths: Current endowment 1 Lower face amounts (USD 5 35mn) 2 Endowment, lower surrender value 3 Single and regular payment, 5 to 10 premium payments 4 Current interest rates calculation Specifics: All-rounder for most of the jurisdictions Setting 3 Our solution Horizon Strengths: Guaranteed endowment 1 High face amounts (USD 25 75mn) 2 Endowment, high surrender value 3 Single premium or regular payment, 5 premium payments 4 Guaranteed interest rates calculation Specifics: Wide range of riders available Setting 4 Our solution Ace Strengths: Guaranteed & current non-endowment 1 High face amounts (USD 25 75mn) 2 Non-endowment, low surrender value 3 Single and regular payment, 5 to 10 premium payments 4 Guaranteed & current interest rates calculation Specifics: No lapse guarantee 23

24 Who are the insurance providers and what is their financial strength? When choosing an international life insurance company to provide financial solutions and long-term investment, it s important to select one that has strong brand recognition, a sound financial background & excellent Asset & Liability Management skills. Transamerica Life (Bermuda) Ltd. / TLB (wholly owned subsidiary of TLIC) Group / Parents Transamerica Life Insurance Company Ltd. / TLIC 1906 (USA) Aegon Group (The Netherlands) / 1875 Sun Life Assurance Company of Canada (Bermuda) Ltd. /SLB 1881 (branch of SLC) Sun Life Assurance Company of Canada Ltd. / SLC 1865 Sun Life Financial Inc. / SLF Financials (as of 31/12/12) TLB (in mn USD) TLIC (in mn USD) Total Assets Total Liabilities Net Worth SLF (in mn CAD) Total Assets Total Liabilities Net Worth Ratings Standard & Poor s AA- AA- Fitch AA- A.M. Best A+ Moody s A1 Standard & Poor s AA- A.M. Best A+ Moody s Aa3 Payment Guarantee Financial strength ratings Solvency requirement and Bermuda Insurance Code of Conduct supervised by Bermuda Monetary Authority (BMA) Claims Payment Guarantee provided by TILC to TLB clients Financial Support Agreement between TLB and TILC Financial strength ratings Solvency requirement and Bermuda Insurance Code of Conduct supervised by Bermuda Monetary Authority (BMA) Products are issued through branch model and therefore backed by the financial strength and claims paying ability of SLC 24

25 How will the money be invested? To deliver on long-term commitments, Asset & Liability Management practices which include taking into consideration liquidity management, credit risk diversification, concentration limits, appropriate asset allocation and duration matching are crucial. Investment portfolio of Transamerica Life Risk management by Sun Life Assurance of Canada 25

26 Why are these insurance providers located in Bermuda? It is the financial strength of the market, key developments in innovative risk financing and strong, flexible regulation that have made Bermuda The World s Risk Capital. The world s third largest insurance centre with over registered companies with an excellent rating as a high quality financial & economic centre, a politically stable government and a highly developed and sophisticated insurance infrastructure. Bermuda is one of the leading insurance centres in the world for the following reasons: no tax liability for policy holders no income, corporation or withholding taxes highest asset protection rules no currency or investment restrictions easy access to all international financial areas security of funds invested in insurance policies (investors protection rules) 26

27 Are there distribution guidelines, ownership rules and different country capacities? Universal Life insurance products are only distributed by licensed independent insurance brokers. Insurance companies do not sell directly to customers. Distribution guidelines Ownership rules No direct client approach. Client has to be recommended by a third-party outside the country of residence (CoR) of the prospect. All discussions with a prospect in foreign jurisdictions other than an Approved Jurisdiction shall be conceptual in nature only. Illustrations, marketing or other materials that name or identify the insurer can only be presented to a client in an Approved Jurisdiction and outside the CoR of the prospect. Medical checks must take place outside the CoR in an Approved Jurisdiction. Third party ownership: Owner / policyholder of a Universal Life Insurance must be a third party (trust, corporation, partnership, foundation) based in an Approved Jurisdiction. For risks who reside in the EU, the offshore entity is required to be domiciled outside of the EU. When choosing Sun Life of Canada, individuals can participate in a group contract. This contract is owned by the Butterfield Trust which is provided by SLC free of any additional charge. Country capacities Countries are classified by underwriting risk regions. This classification is defined by the countries economic standard & has similarities to the classification of the first, second & third world classification. The insured must be a resident of one of the countries defined by the insurance companies and, if required, one of its major cities. This is regardless of the insured s citizenship at the time of the application. 27

28 Does the client need to run a medical check-up prior to the underwriting process? The extent of the required medical exams depends on the insured s age and the specified face amount. The exams have to be conducted in an approved medical centre. Face Amount in mio USD Issue Age Transam Transam Transam Transam Sun Life Sun Life Paramed Paramed Paramed Medical (Transam only) BCP / HOS BCP / HOS BCP / HOS BCP / HOS * ECG ECG 1-2 Paramed Paramed Paramed Medical Medical Medical BCP / HOS BCP / HOS BCP / HOS BCP / HOS BCP / Urin BCP / Urin ECG ECG ECG TRD X-ray,PA.LAT Transamerica abbreviations Paramed = Paramed Exam Medical = Medical Exam Paramed Paramed Paramed Medical Medical Medical BCP / HOS BCP / HOS BCP / HOS BCP / HOS BCP / Urin BCP / Urin ECG ECG ECG ECG TRD X-ray,PA.LAT Paramed Paramed Medical Medical Medical Medical BCP / HOS BCP / HOS BCP / HOS BCP / HOS BCP / Urin BCP / Urin ECG ECG ECG ECG TRD X-ray,PA.LAT Sun Life abbreviations Medical = Medical Exam Urin = Urinalysis BCP HOS ECG TRD = Blood Chemistry Profile = Home Office Specimen (urine) = Resting Electrocardiogram = Treadmill Electrocardiogram Medical Medical Medical Medical Medical Medical BCP / HOS BCP / HOS BCP / HOS BCP / HOS BCP / Urin BCP / Urin ECG ECG ECG TRD TRD X-ray,PA.LATX-ray,PA.LAT Medical Medical Medical Medical Medical Medical BCP / HOS BCP / HOS BCP / HOS BCP / HOS BCP / Urin BCP / Urin ECG ECG TRB ECG TRD TRD X-ray,PA.LATX-ray,PA.LAT BCP = Full Blood Profile ECG = EKG TRD = EKD Treadmill X-ray, PA, LAT = X-ray, PA, Lateral 28

29 Are there additional product features? LAPSE PROTECTION Lapse protection 1) Maximum guarantee period to insured s age 100. Policy will not lapse as long as the lapse protection value is greater than zero, even if the accumulation value is less than zero. 2) The lapse protection value is a reference value, similar to the accumulation value, but calculated with lapse protection factors (interest rate, mortality rates, expense charge) RISK RIDERS / OPTIONS (not available with all products) Accident Indemnity Rider AI provides for the payment of an additional death benefit if the insured dies as a result of accidental bodily injury as defined in the policy. Waiver Provision In the event of total disability, the WP waives all monthly deduction upon satisfactory proof of the insured s permanent disability. Yes Accelerated Death Benefit (terminal illness) Provides advance death benefits upon diagnosis of Terminal Illness. Automatic Premium Loan APL provides the policy owner with the opportunity to pay required premiums by creating loans against the policy cash value. No Surrender Penalty Free Withdrawal & Deferral Endorsement Alternative Paid-Up Option Provision to allow the policy owner to access up to 10% of the policy accumulation value when critical care is necessary or a one-time face reduction on or after the fifth policy anniversary with no company-imposed surrender charges assessed at that time. This option allows the policy owner the opportunity to surrender the policy and use the net cash value to purchase an alternative paid-up life insurance policy. Insured Exchange Option The IEO permits the policy owner to exchange the current policy for a new policy insuring a new base insured. No Surrender Penalty Waiver Endorsement The SPWE waives a portion of the company-imposed surrender charges if a full surrender of a policy is made during the first five policy years. Extra costs Yes No No No No 29