A life settlement is the sale of a life insurance policy by the policyholder to a third party for a mutually agreed upon price.

The key factors in determining the market value of a policy is the amount of death benefit, the cost of future premiums and the life expectancy of the insured.

So how do you know whether a life settlement is an option for your policy?

The basic qualification for your policy to be considered for a life settlement is when you are 65 or older, the face amount of the death benefit is 250,000 or more and an insured’s life expectancy is considered to be 12 years or less. The lower the premiums and the shorter the life expectancy, the higher the selling price.The greater the amount of premiums that need to be paid and the longer the investor must wait for the death benefit, the lower the policy value.

There are basically 4 elements to determining the value of a policy.

1. Amount of the death benefit to be paid pursuant to the policy.

2. The remaining expected life of the insured.

3. The amount of premiums to be paid until the death benefit is paid.

4. The discount rate or required rate of return on the purchaser/investors investment.

While every case is different, the death benefit is known in each case and in most cases the amount of the annual premium payments can be calculated with a reasonable amount of certainty. The one variable that is the most difficult to predict is the remaining life expectancy of the insured and so this factor is the biggest risk to the investor.Trying to determine how long an insured will live is at best uncertain based on an insured’s age, gender, health and lifestyle.

Finally, the selling price of a policy will always be greater than the cash surrender value but less than the death benefit.

Do you have a life policy that you no longer want to keep? 

Call us and we would be happy to give you our free no risk assessment!