Since the life expectancy for women is typically about five years longer than for men, the longer life expectancy may affect a policy’s value. More on why I say may in a moment.
The sale of an insurance policy is often referred to as a life settlement, which is a transaction where a life insurance policy is sold by its owner, to a third party.
The purchaser is typically referred to as a life settlement provider. Sometimes a broker is used by the life settlement provider.
The purchaser looks at their desired rate of return, annual premiums required and death benefit to help determine what they are willing to offer for the policy.
Now, we know the life expectancy for women is longer than a man’s. So, we would normally expect that since the buyer will have to pay more premiums before the female insured’s policy pays a death claim, the buyer would be expected to offer less money.
It is not quite that easy. It is not the life expectancy for women as a group that determines the amount offered for the policy. It is each individual woman’s life expectancy estimate that will go into the offer. Since the original policy premium was lower for women in general when the policy was originally purchased, knowing her life expectancy may actually get a higher overall offer.
An experienced advisor can help with these pieces of a life insurance valuation. Click the LIVEpdq link to be connected with an experienced advisor.