Life Settlement Calculator
You’ve heard about the possibility of selling a life insurance policy you don’t need or can’t afford, and you’re thinking you could use the cash to pay medical or long-term care bills, or to invest in a more comfortable retirement. But before you take the step of contacting a life settlement company, you’d like to get some idea of how much money you can get for your policy – and whether you’re even eligible to sell it. An online life settlement calculator can provide a quick general assessment of your eligibility to sell your life insurance policy, but it cannot replace the in-depth medical underwriting process required to accurately estimate the value of that policy. Read on to learn more about how eligibility and policy value are determined.
Eligibility Requirements for a Life Settlement
Some of the data you input into a life settlement calculator will determine whether you qualify to sell your life insurance policy to a third party for cash. You must be at least age 65 to make a traditional life settlement, and some life settlement companies (including Harbor Life) require you to either be age 70 or older or have a severe medical condition.
Your age and general health status figure into a key consideration of whether a life settlement or viatical settlement is a viable option for you: your life expectancy. The more advanced your age and the more challenging health conditions you face, the more likely your life insurance policy will attract a buyer willing to pay a substantial price for it. The harsh truth is that a shorter life span for you spells fewer financial obligations for the life settlement buyer who will take over the payment of your insurance premiums. Thus, the investment can be expected to yield a bigger net return.
A life settlement calculator will also factor in information about the policy you own. The types of policies that qualify for life settlements include universal life (which makes up the bulk of policies sold on the secondary market), whole life, and term life policies that can be converted to permanent. A second-to-die policy — usually held jointly by a married couple, with payments issued to beneficiaries only after the death of the last surviving person named as co-owner – also qualifies for a life settlement. Both group and individual policies that are either permanent or convertible qualify for life settlements.
Another important policy detail is how long you’ve owned it. Each state regulating the life settlements industry sets its own requirements for minimum policy age, as well as for any exceptions granted in cases such as divorce or the death of a spouse.
Finally, most life settlement companies will require a minimum face value, which is the amount the policy pays out in death benefits. Some companies will consider policies valued as low as $50,000, while others set the bar much higher.
Eligibility Requirements for a Viatical Settlement
While life settlements are limited to policy owners age 65 and older, there is no minimum age requirement for a viatical settlement. This special type of third-party life insurance policy sale is available with policies covering people of any age who have a terminal or chronic illness. For the purposes of viatical settlement eligibility, a chronic illness is defined as one that renders the patient unable to perform two or more activities of daily living (such as eating, bathing, using the toilet or dressing) for at least 90 days. The life expectancy of the insured person in a viatical settlement is typically two years or less.
A life insurance policy must be at least two years old to qualify for a viatical settlement, and the policy must have a face value (death benefit) of at least $200,000.
Major Factors for Calculating Life Settlement Value
In most cases, the older you are, the more highly a life settlement investor will value your life insurance policy, and the estimate you receive from a life settlement calculator will reflect that fact. Your current age is one of the key variables in estimating your life expectancy, a gauge that buyers use to help determine how much they are willing to offer for your policy.
The shorter your life expectancy, more valuable your life insurance policy will be to a buyer, and gender makes a significant difference in that outlook. The most recent report from the Centers for Disease Control & Prevention shows that in 2018, the average life expectancy for U.S. males was 76.2 years, compared to 81.2 years for females. That continuing life expectancy gap tends to mean that, other factors being equal, life insurance policies covering men fetch higher prices in the life settlements market.
Your health condition is another factor in the calculation of your life expectancy and, as you can probably guess, that number will be lower if you have serious health problems. It may seem odd to think of poor health as being a financial asset, but because life settlement buyers want to minimize the number of years they will have to pay a seller’s insurance premiums, the sicker you are, the more valuable your policy will be.
The size of your life insurance policy – that is, the amount of death benefit if will pay – also impacts its value in the life settlements market. In general, a policy with a bigger death benefit will bring in a higher price.
Since life settlement investors pay all future premiums until the policy matures upon the death of the person who is insured, they consider that expense when evaluating a policy’s worth. They do so by multiplying the annual premium amount by the insured person’s estimated life expectancy in years. The longer the life expectancy, the more those premium costs add up, and the less buyers will be willing to pay for a policy. A policy requiring lower total premium costs due to a shorter life expectancy will usually bring in a higher offer.
If you have an outstanding loan against your life insurance policy, prospective buyers will factor that into how much they offer. That’s because, if you should die before paying off the loan, the amount you owe, including the principle balance and the interest, would be deducted from the death benefit the new policy owner received.
While all kinds of life insurance policies can be sold on the life settlements market, universal life policies will usually fetch the highest prices. Many term life policies can be converted to universal life if they have a conversion rider. Harbor Life can help you analyze your policy to see if this is an option.
Investor discount rate
A life expectancy estimate is not a certainty. Prospective life settlement buyers can’t make a guaranteed projection of how much they will pay in premiums over the life of a policy and what their investment will finally be worth when that expense is subtracted from the death benefit payout they will receive. It’s also difficult to make a reliable comparison between the potential returns of a life settlement purchase and the returns that might be possible from another type of investment.
To account for those uncertainties, life settlement investors apply a discount rate that ultimately affects the value of a life settlement for you, the seller. The higher the discount rate, the less money you will receive for selling your policy. The lower the discount rate, the more money your policy will bring in.
Life insurance issuer
Prospective buyers will also consider the financial stability of your life insurance issuer, because they want to be sure the company will be able to pay the death benefit claim when it comes due. They will look at how insurance industry rating agencies assess the company’s solvency, and the amount they bid will reflect how high that rating is. If the rating is too low, the life settlement provider might consider the policy too risky to bid on at all.
The biggest risk to the buyer of your life insurance policy is that you will live a lot longer than expected. While experts can use actuarial tables and other tools to make general projections about the life expectancy of someone of your age, gender, health and lifestyle, they can’t make any guaranteed predictions of how long an individual person will live. A potential buyer’s perception of that risk will likely color the value they put on your life settlement offer.
How to Calculate a Life Insurance Policy’s Value
Let’s say you’re a 54-year-old man living in Massachusetts who’s been diagnosed with a terminal illness and has a life insurance policy with a $500,000 death benefit. Or suppose you’re a 73-year-old Florida woman with relatively minor health complaints and a life insurance policy with a $750,000 death benefit. While you won’t find a calculator tool on the Harbor Life website that spits out an instant quote on what your policy is worth when you plug in that data. Instead, we start with a simple online form for you to submit some basic information that helps us determine whether you would be a good candidate for further exploration of a life or viatical settlement. If you are, the next step is to begin the underwriting process that will produce an estimate of your life insurance policy’s value.
Get Your Free Life Settlement Estimate with Harbor Life Settlements
Here at Harbor Life, we perform a thorough assessment of whether a life or viatical settlement is a viable option for you. If you’re a good fit, we gather additional information about your health status and other key factors and work with underwriters to calculate an estimate of what your life insurance policy is worth.The quote is absolutely free, and you are under no obligation to sell your policy because you receive this information.
If you find out you qualify for a life settlement or viatical settlement and that your policy is valued high enough to make selling it worthwhile, you can take the next step of talking things over with a Harbor Life representative before you make a decision.
If you decide to move forward with the transaction, Harbor Life will shop multiple providers to get you the best price for your policy. We’ll use the information you provide in your application to identify and connect you with an interested, qualified buyer in your area. Because we handle the legwork, you avoid spending hours of your own time doing research and negotiating with brokers.
A life insurance policy buyout through Harbor Life can take less than two weeks, while other life settlement companies can take as long as six to nine months. Harbor Life helps you get that cash in hand fast, so you can use it right away.
The process of doing a life settlement or viatical settlement starts officially when you submit an application that includes detailed information about you, your medical history and your life insurance policy. You will either provide Harbor Life with your medical records yourself or submit a list of health care providers who can supply the information. All personal information is kept strictly confidential and never sold. Harbor Life uses it solely to find and connect you with the best buyer for your policy.
After an initial review of your application package, it goes to a life expectancy underwriter for an evaluation of how much your life insurance policy is worth on the life settlement market. With a price target established, the next step is to find matches with potential life settlement providers –that is, individuals or companies who purchase life insurance policies. If one of those providers decides that purchasing your policy would be a good investment, they will make an offer. If you decide to accept the offer, the life settlement provider will put together a closing package that includes a purchase and sale agreement. You and your originally designated beneficiaries will sign those documents, which the life settlement provider will co-sign.
The next step is for your life insurance issuer to be notified in writing that the life settlement provider is the new owner and beneficiary of your policy. That notification permits the escrow agent, which holds the settlement payment in trust until the sale is finalized, to release the money to you.
As you can see, a life settlement is a complex process, but Harbor Life makes it easier by handling many of the most time-consuming details for you. Fill out the form below to get started on calculating the estimated worth of your life insurance policy and exploring whether selling that policy for cash is the right financial move for you and your family.