When determining the cash value for your life insurance policy, buyers look at the size of the policy, the insured’s life expectancy, and the amount they would need to pay over that duration to keep the policy active. The amount they’re able to pay for your policy is based on the difference between expected costs to maintain the policy and the death benefit. There are other factors that may affect payout, but the cash value of life insurance is the basis of calculation.
Because there are so many factors, payouts can range from 1% to 70% or more of the face value.
Larger policies usually result in larger payouts.
The amount the buyer expects to pay over the insured’s lifetime.
The payment is a portion of the remaining “market value” of your policy.
Almost every policy type has cost of insurance increases built into the premium schedule at inception. This means that the insurance company has predetermined points throughout the “life” of the policy where the costs to maintain it will increase–sometimes drastically.
And in some instances, such as with term policies, the policy is only effective for a prescribed period of time (e.g., 20 years, 30 years, etc.), at the end of which the policy will need to be converted to a much more expensive type of policy, or lapsed for nothing.
Life settlement providers must take these changes into consideration when determining what they're willing to pay for your policy. If they believe, based on all available information, that the policy will mature before significant cost increases, they may pay more for your policy. But if the opposite is true, their offer may be lower––and sometimes, they may not be able to make an offer. Understanding your policy can help make sure you get the most value when you elect to cash in your life insurance policy.
Similar to when you first purchased your life insurance policy, the buyer will perform a comprehensive underwriting analysis to evaluate the insured’s health conditions and health history. The more information available, the better your offer may be. It can be helpful to collect this policy information early in the process of a life insurance buyout.
Once you provide a signed authorization, we will work quickly to gather all medical records and policy information. This information is then reviewed by the underwriting and actuarial teams to determine an approximate life expectancy.
From there, you'll know the approximate worth of your policy and can make an educated decision about potentially selling it. And as always, there's no cost or obligation associated with any of our services.
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