Life Settlement: How a Policy is Appraised

Life settlement, I am sure you have heard the buzz by now. You can sell your old life insurance policy for more than the insurance company will give you for the cash value. How much more? That depends. Several factors are considered when a policy is evaluated for a life settlement.

Personal information, of course they are going to need the usual. Age or date of birth. Gender. What state do you live in. Your state of residence is an important question. Regulations vary from state to state and not all companies are licensed in every state.

Policy information works into the valuation also. Make sure you have your policy handy when you meet your financial advisor or life settlement broker. They will need to know the type of policy. Term, whole life, universal and most others are eligible. Some investors may prefer one type over another.

When was the policy issued and which company issued it are also important to the investors. Some companies are resistant to the life insurance settlement process and may take their time confirming information the broker needs. Some states have put regulations on the books requiring life insurance companies to act in a timely manner.

Annual premiums and Cash Surrender Value (CSV) will also be figured into the valuation. Many times the investor will use the CSV to pay the premiums after he has bought the policy.

Medical information will be used to calculate life expectancy. You will have to sign medical release forms and may be asked to take a physical. They will need to know if there are any serious medical conditions. An insured with a terminal illness will receive a better settlement than someone who has a serious but treatable condition.

Market conditions will also affect the value of the offer. The current stock market downturn and economic decline has caused more investors to take an interest. The life settlement asset class is thought to be less dependent on other markets and more stable than stocks or bonds. The more investors interested the better the offers will likely be.

All this information is used by the life settlement company or investor to calculate a probable rate of return on their investment. While the calculations are similar from company to company the results may differ depending on what is emphasized. Offers may vary by thousands of dollars so collect as many as you can before making a decision.