Informational
How Much Is My Life Insurance Policy Worth?
As a general guideline, policyowners receive on average more than four times the cash surrender value when selling their life insurance policies. But rather than ballparking what you may receive, we recommend using our instant life settlement calculator. If you’re the curious type and are still interested in understanding what actually goes into a life settlement evaluation, please read on for an overview of some of the most common factors that affect what your life insurance policy may be worth.
Not All Policies Have Market Value
At Ovid, we believe that providing realistic expectations is the cornerstone of great customer service. That’s why we want to get one important point across early: not all life insurance policies have market value. That means that, while any policy type may qualify, it doesn’t mean there will necessarily be a purchaser for your policy. But don’t let that stop you. We often see policies that don’t qualify on the first attempt come back later and qualify.
For example, if an insured has a current life expectancy of 30 years and their policy doesn’t qualify, but the person receives an unexpected medical diagnosis that reduces their life expectancy, their policy could then have significant market value. If your policy doesn’t qualify on your first attempt, we strongly recommend an annual policy checkup to see if your policy has value in the future.
Now that we have that out of the way, let’s dive into the factors that affect market value:
Life Expectancy
One of the most important factors to consider when determining the market value of a life insurance policy is the insured’s life expectancy. This is determined by evaluating the insured’s age and current health status. The shorter the insured’s life expectancy, the greater the offer may be as a percentage of the policy’s face value.
Life expectancy is estimated by performing a thorough review of the insured’s medical history, including medical records. The process is similar to when you first purchased your policy, with the exception that you will not be required to give a blood or urine sample or undergo a medical evaluation when selling your policy.
Policy Type
The type of policy you own can also affect the market value. Not because one policy type is inherently more valuable than another, but because different policy types can have different characteristics that can affect the financial outcome for the policyowner or buyer. While all policy types can qualify, there are certain characteristics that could prevent a policy from qualifying.
For example, Term Life insurance typically expires at a certain specified time. And while it may be renewable or convertible to permanent life insurance, it usually comes at a considerable cost. And if the Term Life policy isn’t convertible, the coverage may expire before maturity–leaving the buyer with a net loss for the investment they made to purchase the policy and subsequent premium payments to keep it active.
Policy Size or Death Benefit
In general, the greater the death benefit of a policy, the greater an offer can potentially be. One thing to keep in mind, however, is that larger policies often have much higher premiums; when combined with a longer life expectancy, a large policy insuring a healthy individual could receive a smaller offer than a smaller policy insuring a life with a serious illness.
Premium Costs
Premium costs refer to the cost to keep the policy in force. Life insurance carriers define your policy’s premiums and project the cost to maintain the policy on a document known as an illustration. Life settlement providers will use your policy’s illustration, along with the other factors listed here, to determine a potential offer for your policy.
Life Insurance Company Rating
The financial credit rating of your life insurance company may affect your policy offer or ability to qualify. If your policy was issued by a life insurance company with a low credit rating, a life settlement provider may extend a lower offer for your policy because they must assume the risk of the insurer defaulting on its obligations.
Other Financial Considerations
From the life settlement provider’s perspective, a life settlement transaction is a delicate balance of risk vs. reward. Our affiliate, Life Equity, is a leading life settlement provider that has been in business for more than 20 years. Life Equity is positioned to make fast and competitive offers, and provides an unmatched level of service.
