This calculator helps insurance agents and financial advisors estimate the potential net profit from selling a term life insurance policy. It considers the policy's face value, any existing cash value, the offer received from a viatical settlement provider (if applicable), outstanding loan balances, and the sales commission earned. While term life insurance policies are primarily designed to pay out a death benefit and typically do not build significant cash value like permanent policies, some might have riders or features that create a small surrender value. This calculator is most relevant when considering the sale of a policy through a life settlement or if there are specific features that allow for a cash-out.
Key Components of the Calculation:
Policy Face Value: The total death benefit the policy is designed to provide. This is the primary insured amount.
Current Policy Cash Value: For traditional term life, this is often zero or negligible. However, if the policy has been converted or has specific dividend options, a small cash value might exist.
Viatical Settlement Offer: If the policyholder is terminally or chronically ill, they might be eligible for a viatical settlement, where a third party purchases the policy for a lump sum. This offer is a crucial factor in determining the sale's value.
Outstanding Policy Loan Balance: If a loan has been taken against the policy (more common in permanent policies, but possible in some complex term structures or riders), this amount reduces the net proceeds.
Sales Commission Rate: The percentage of the sale value or premium that the agent/advisor earns. This is the primary income component for the seller.
How the Calculation Works:
The calculator determines the Gross Sale Value by taking the Viatical Settlement Offer and adding any Current Policy Cash Value. From this gross value, it subtracts the Outstanding Policy Loan Balance to arrive at the Net Sale Proceeds. The Sales Commission is then calculated as a percentage of the Net Sale Proceeds. The final result represents the Potential Net Profit for the agent/advisor.
Formulaically:
Gross Sale Value = Viatical Settlement Offer + Current Policy Cash Value Net Sale Proceeds = Gross Sale Value - Outstanding Policy Loan Balance Sales Commission = Net Sale Proceeds * (Commission Rate / 100) Potential Net Profit = Sales Commission
When is this Calculator Useful?
This tool is particularly useful for:
Insurance agents assessing the viability of brokering a life settlement for a client.
Financial advisors exploring options for clients who may no longer need their life insurance coverage or are facing financial hardship.
Understanding the potential earnings from a specialized transaction involving life insurance policies.
It's important to note that the actual sale of a life insurance policy, especially through a viatical settlement, is a complex process involving medical evaluations, policy assessments, and regulatory compliance. This calculator provides an estimate of the financial outcome for the salesperson involved.
function calculateSaleProfit() {
var faceValue = parseFloat(document.getElementById("policyFaceValue").value);
var currentCashValue = parseFloat(document.getElementById("currentPolicyValue").value);
var settlementOffer = parseFloat(document.getElementById("viaticalSettlementOffer").value);
var policyLoan = parseFloat(document.getElementById("policyLoanBalance").value);
var commissionRate = parseFloat(document.getElementById("commissionRate").value);
var grossSaleValue = 0;
var netSaleProceeds = 0;
var commission = 0;
var netProfit = 0;
// Validate inputs
if (isNaN(faceValue) || isNaN(currentCashValue) || isNaN(settlementOffer) || isNaN(policyLoan) || isNaN(commissionRate)) {
document.getElementById("result").innerHTML = "Please enter valid numbers for all fields.";
return;
}
// Ensure values are not negative where they shouldn't be
currentCashValue = Math.max(0, currentCashValue);
settlementOffer = Math.max(0, settlementOffer);
policyLoan = Math.max(0, policyLoan);
commissionRate = Math.max(0, commissionRate);
// Calculate Gross Sale Value
// For term policies, cash value is often 0. Viatical offers are usually based on expected payout less commission/costs.
// However, for calculation purposes, we'll sum them as provided.
grossSaleValue = settlementOffer + currentCashValue;
// Calculate Net Sale Proceeds
// Ensure proceeds don't go negative if loan > offer + cash value
netSaleProceeds = Math.max(0, grossSaleValue – policyLoan);
// Calculate Commission
commission = netSaleProceeds * (commissionRate / 100);
// Net Profit is the commission earned
netProfit = commission;
// Format the result to two decimal places
var formattedProfit = netProfit.toFixed(2);
document.getElementById("result").innerHTML = "Potential Net Profit: $" + formattedProfit + "";
}