The amount received from selling a policy will always be greater than the cash surrender value and less than the death benefit value.
When you sell your insurance policy, you receive a cash payment. The buyer pays all future premiums and receives the death benefit when the policy matures (when the insured dies).
Every case is different. The amount you receive will depend on:
1. The death benefit/value of the policy – amount investor receives at the death of the insured
2. The annual premiums – the amount of premiums that will be paid until the insured dies
3. The number of years premiums will need to be paid – the remaining expected life of the insured
4. The rate of return the buyer of the policy requires to make the investment
The amount received from a policy is a mathematical determination that takes into account the impact that each of the factors has on the value. The higher the premiums, the longer the life expectancy and the higher the required investor’s return, the lower the value of the policy. Conversely, the lower the premiums, the shorter the life expectancy and the lower the investor’s required return, the higher the value of the policy.
Life settlement transactions are complex. Anyone considering a life settlement should first talk with his or her insurance, financial and legal advisors and work with members of the Life Insurance Settlement Association.