The value of a life insurance policy in a settlement is based on several key factors, all related to the long-term cost and benefit of keeping the policy active. The most significant elements are the insured’s age, general health, and life expectancy, because these help buyers estimate how long they will need to pay premiums before receiving the death benefit. Premium costs themselves are extremely important; policies with low, steady premiums are often more valuable because they are less expensive for buyers to maintain.
Policy size also plays a major role. Larger policies typically attract more buyers and higher offers, although offers can vary. The type of policy matters as well. Universal life, whole life, and convertible term policies generally provide the most value because they offer predictable structures.
The financial strength of the insurance carrier may influence value too, since buyers prefer stable companies with strong ratings. Policy loans, surrender charges, and past changes to the policy may also affect the final value. The combination of these factors creates the total picture buyers use to determine what they are willing to pay.
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