Estimate the potential cash offer for your life insurance policy.
Estimated Offer: To Be Determined
Understanding Life Settlements
A life settlement, also known as selling a life insurance policy, is a transaction where a policyholder sells their existing life insurance policy to a third party for a lump-sum cash payment. This payment is typically more than the policy's cash surrender value but less than the death benefit. This option becomes increasingly relevant for individuals who no longer need their life insurance coverage, find the premiums unaffordable, or wish to access funds for retirement, healthcare, or other financial needs.
How is the Offer Calculated?
The calculation of a life settlement offer is complex and involves multiple factors. While a precise formula is proprietary to each viatical settlement provider, the following elements are generally considered:
Policy Face Value: The total death benefit your beneficiaries would receive upon your passing. This is the maximum potential payout.
Current Cash Value: If your policy has accumulated cash value (common in permanent policies like whole life or universal life), this is a baseline value.
Annual Premium Cost: The ongoing cost to maintain the policy. Providers assess how many more years premiums will likely need to be paid.
Insured's Age and Health: The older and less healthy the insured individual, the sooner the death benefit is likely to be paid out, making the policy more valuable to a buyer. Medical records and a health assessment are crucial.
Life Expectancy: Based on the insured's age, health status, and medical history, actuaries estimate the remaining lifespan. A shorter life expectancy generally increases the offer.
Policy Type: Term vs. Permanent policies are valued differently. Permanent policies with cash value are typically more amenable to settlements.
Market Conditions: Investor demand and the overall financial markets can influence the premiums buyers are willing to pay for policies.
The Calculator's Estimation
This calculator provides a simplified estimation based on the inputs you provide. It uses a proprietary algorithm that considers the interplay between the policy's face value, its cash value, ongoing premium costs, the insured's age, estimated life expectancy, and a general health rating. The health rating (1-5) is a proxy for medical underwriting, where a lower number indicates poorer health and potentially a higher offer.
Disclaimer: This calculator is for informational purposes only and does not constitute a financial offer. The actual offer you receive from a life settlement provider will depend on a thorough underwriting process, current market conditions, and the provider's specific valuation methods.
Who Might Consider a Life Settlement?
Policyholders who no longer have dependents or a need for the death benefit.
Individuals facing financial hardship and needing funds for medical expenses, long-term care, or daily living costs.
Seniors who find their life insurance premiums becoming too burdensome to pay.
Those who wish to consolidate assets or diversify their retirement income.
If you are considering selling your life insurance policy, it is advisable to obtain quotes from multiple reputable life settlement providers to ensure you receive a competitive offer.
function calculateLifeSettlement() {
var faceValue = parseFloat(document.getElementById("policyFaceValue").value);
var cashValue = parseFloat(document.getElementById("currentCashValue").value);
var annualPremium = parseFloat(document.getElementById("annualPremium").value);
var insuredAge = parseFloat(document.getElementById("insuredAge").value);
var lifeExpectancy = parseFloat(document.getElementById("lifeExpectancy").value);
var healthRating = parseFloat(document.getElementById("healthRating").value);
var resultElement = document.getElementById("result");
var estimatedOfferText = "Estimated Offer: ";
// Input validation
if (isNaN(faceValue) || faceValue <= 0 ||
isNaN(annualPremium) || annualPremium < 0 ||
isNaN(insuredAge) || insuredAge <= 0 ||
isNaN(lifeExpectancy) || lifeExpectancy <= 0 ||
isNaN(healthRating) || healthRating 5) {
resultElement.innerHTML = "" + estimatedOfferText + "Please enter valid numbers for all fields.";
return;
}
// Handle cash value being optional and potentially NaN
if (isNaN(cashValue) || cashValue < 0) {
cashValue = 0;
}
// — Simplified Estimation Algorithm —
// This is a conceptual model. Real-world calculations are more complex.
// Factors:
// 1. Base offer usually between cash value and a percentage of face value.
// 2. Discount for future premiums.
// 3. Premium for earlier payout (health/age).
// 4. Health rating adjustment.
// Base range: Assume offer is at least cash value, and potentially up to ~50% of face value, influenced by health and age.
var baseOfferFactor = 0.5; // Max percentage of face value considered initially
var healthFactor = (6 – healthRating) / 5; // Higher factor for poorer health (e.g., rating 1 gives 1.0, rating 5 gives 0.2)
var ageFactor = Math.max(0.1, (100 – insuredAge) / 100); // Older insureds are more valuable
var estimatedBase = Math.max(cashValue, faceValue * 0.1) + (faceValue – Math.max(cashValue, faceValue * 0.1)) * baseOfferFactor * healthFactor * ageFactor;
// Adjust for future premiums: Estimate remaining premiums needed.
// Crude estimate: number of years until estimated payout * annual premium.
var remainingPremiumYears = lifeExpectancy; // Simplified
var totalFuturePremiums = remainingPremiumYears * annualPremium;
// Discount future premiums to present value (using a simple discount rate, e.g., 8%)
// A more accurate model would use an annuity formula.
var discountRate = 0.08;
var presentValueFuturePremiums = totalFuturePremiums / Math.pow(1 + discountRate, remainingPremiumYears / 2); // Discounting to midpoint of expectancy
// Calculate potential offer: Base estimate minus discounted future premiums.
var potentialOffer = estimatedBase – presentValueFuturePremiums;
// Ensure offer isn't negative and is reasonably related to face value and cash value.
potentialOffer = Math.max(cashValue * 1.1, potentialOffer); // Ensure it's at least slightly above cash value
potentialOffer = Math.min(potentialOffer, faceValue * 0.7); // Cap offer reasonably below face value
// Add a small premium for faster payout based on life expectancy
var payoutPremium = (1 / lifeExpectancy) * faceValue * 0.05; // Smaller adjustment based on shorter expectancy
potentialOffer += payoutPremium;
// Final check and formatting
potentialOffer = Math.max(0, potentialOffer); // Cannot be negative
potentialOffer = parseFloat(potentialOffer.toFixed(2)); // Format to 2 decimal places
// Add currency formatting for display
var formattedOffer = "$" + potentialOffer.toLocaleString('en-US');
resultElement.innerHTML = "" + estimatedOfferText + formattedOffer + "";
}