As life settlements become a more popular tool for retirement income and financial planning, the question always boils down to how much is my life insurance worth? A life settlement appraisal is the first step in understanding if selling an existing life policy makes sense. There are several factors that contribute to a life insurance policy's value as a life settlement.
A significant component to establishing the life settlement value of a policy is the insured's life expectancy. This is probably the most important factor aside from the policy's face value itself in determining a secondary market value. The insured's age, health, medical conditions, family history and gender are all evaluated to determine a probably longevity by buyers and outside medical appraisers. A policy insuring someone with a short life expectancy (LE) is more valuable than one insuring someone with a longer LE.
The settlement value of a life policy is also affected by the type of policy. Non convertible term policies are not appealing on the market, but Universal, Whole Life and convertible term policies are sought after. Universal policies are often the most attractive to buyers as they provide a great deal of flexibility in premium payments and often have cash value that can be accessed by the buyer.
The policy owner is also an important aspect of valuing an insurance policy. If the owner of the policy has recently filed bankruptcy, creditors may try to claim the policy. In addition, the state of residence or domiciliary state affects the value of an insurance policy. Senior settlements are regulated on a state by state basis. If the policy seller is from a state that has prohibitive regulations or very few licensed buyers the settlements offers will be affected accordingly.
The life settlement market itself has an impact on the value of an insurance policy. The buyers of policies are typically large financial institutions such as retail banks, hedge funds and investment funds. When these institutions have capital to deploy, the settlement market becomes more competitive and policies carry a premium. However, the financial institutions don't have as much money to invest in policies, the settlement market may see discounting of policies.
Policy owners that understand the factors contributing the value of their insurance policy are more apt to maximize their asset's value. By recognizing what makes a policy attractive and valuable they can better plan if and when to sell their insurance policy.
Learn more about a life settlement. Stop by Kelly Ramirez's site where you can find out the value of your life insurance policy with a life settlement appraisal.
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