Since 2013, Eugene E. Houchins III has served as the president and founder of American Life Fund Corp, based in Georgia. Through his business, Eugene Houchins helps clients who need to sell or take out a loan on their existing life insurance policies.
Knowing what your life insurance policy is worth is hugely beneficial. Not only does it help with estate planning, it also enables you to gift the policy to someone else, sell it to a third-party, or take out a loan against it. However, there are many factors affecting the value of your policy that determining this value is difficult. The following is a brief overview of some of these factors:
Premium cost
If you plan on selling your insurance policy, the investor or buyer will be responsible for paying the premiums on the policy until you pass away. For this reason, a great deal of value is placed on policies with smaller premiums. Since buyers have to pay less for the remainder of these policies, they can often enjoy a larger return on their investment.
Policy size
While a small policy can sometimes be sold, greater value is placed on larger policies. The death benefit of your policy goes to whomever owns the policy. Assuming you’ve sold the policy, the buyer is the one who receives the payout. In many cases, your policy isn’t even eligible for purchase unless it has a death benefit of at least $100,000.
Life expectancy
This factor may seem strange, but life insurance policies are deemed more valuable if you are older. The reason is that as a policyholder with a shorter life expectancy, you have already lived the majority of your life span and the policy to closer to paying a death benefit, thus benefiting investors more quickly. The typical minimum age to qualify for a life settlement for an average healthy senior is 65 to 70. This age qualification is lower, of course, if chronic or terminal conditions exist.
