The most important question is often, “How much can I get for my policy?”. While an Instant Estimate is helpful, how a policy is valued depends on the insured health & policy specifics. Policies with exceptionally low premiums can obtain high offers, while policies with very high premium can struggle to obtain any offers at all. The only way to know what the true fair market value of a life insurance policy is, requires a life settlement application to be completed and full underwriting done.
How Pricing Works:
When evaluating a life insurance policy as a potential investment, the Internal Rate of Return (IRR) is used as the measure of performance. The importance of accurately determining life expectancy requires one or more life expectancy reports being obtained. Combined with projected on-going premium payments, this allows a determination of IRR. Most funds target an IRR between 12% – 15% in order to offset for incorrect life expectancy estimates.
For this reason, a fairly healthy 72 year old may obtain a low offer because the fund expects to pay premium over the next 15 years and still need to show a certain rate of return. It is important to note that a fund making $100,000 after 3 years is much different than a fund making $100,000 after 15 years. The time value of money comes into play, so offer amount is not relative to the amount made, it is relative to what the annualized return is considering the time value of money.
How To Maximize Your Offer:
The best way to maximize an offer for your life insurance policy is to work with a licensed professional that can navigate the process and ensure the most appropriate life expectancy reports are obtained, as well as the most comprehensive network of funds are a part of the process.