Life settlements are a great option for life insurance policyholders who no longer need them - or simply would like to exchange them for a fair monetary value. If you’re interested in receiving a settlement, it’s very likely that you’d like to receive the maximum payout possible for your policy. In this blog, we’ll define and explain multiple factors that may increase the value of your life settlement.
What Factors Increase Life Settlement Value?
Older Age & Lower Life Expectancy
- This is arguably the most important factor that will dictate the value of your settlement. Policies covering elderly individuals will come with higher life settlement payouts, as well as those covering people with terminal illnesses. As investors will be required to pay the premiums on the policy until the insured passes away, they typically price the policies of older individuals higher. These policies are also much more marketable and attractive when attempting to settle.
Higher Death Benefit
- The policy death benefit is also something investors will look at very closely before placing a value on your life insurance policy. As you would expect, whoever purchased the policy will receive the full death benefit when the insured passes away. Therefore, it is in their best interest to make sure they can receive a policy with the highest benefit possible - in addition to the other factors on this list. Investors rarely consider policies that with death benefits under $100,000.
- When you sell a life insurance policy, the investor who purchases it is responsible for all future premium payments in order to keep it active. Of course, the more money that is spent paying premiums reduces the return that can be realized from the investment. Your premiums are decided when you buy the policy based on your age, medical status, and other external factors. Depending on your specific life insurance company, you may be able to decrease your policy premiums in exchange for a lower death benefit. You’ll need to weigh this trade-off correctly in order to maximize your policy’s value.
Higher Cash Value
- The longer an insured person has held their policy, the higher the cash value of it will be. Policies with higher cash values are more attractive to investors because the amount of money needed to keep it active is drastically reduced. The cash value of many policies can be used to pay for future premiums, making it much more valuable over the long term. If you’re considering a settlement, you may want to wait a few years if increasing the value of your policy is important to you.
As you can see, the settlement value of your life insurance policy is based on quite a few factors. There are several ways to increase your policy as well. Need assistance increasing the value of your life insurance? The Life Insurance Settlement Association is here to help. Be sure to connect with one of our many partners to discuss the options available for your specific situation.