Selling a life insurance policy for a lump sum is genuinely different from surrendering it back to the insurer — a buyer pays more than cash surrender value but less than the full death benefit, profiting from the gap once they eventually collect.
How it works
The death benefit, minus the future premiums the buyer expects to pay to keep the policy in force, gives a net value. Applying the buyer’s discount factor — driven mainly by the insured’s life expectancy and the buyer’s required return — produces an estimated settlement offer.
What this does not include
Real settlement offers vary significantly by buyer and depend heavily on detailed underwriting of the insured’s specific health and life expectancy — this calculator’s single discount factor input is a simplification of that underwriting process.
How to use this calculator
- Enter the policy’s death benefit and expected future premiums the buyer would pay.
- Enter an estimated buyer discount factor.
Frequently asked questions
Is a viatical settlement the same as a life settlement?
A viatical settlement typically involves a terminally or chronically ill insured; a life settlement is the broader term covering any policy sale, often to an older insured without a terminal diagnosis.
Why is the offer always less than the death benefit?
The buyer needs to profit from eventually collecting the death benefit after paying ongoing premiums and waiting — the discount reflects that time value and risk, similar to how a structured settlement buyer prices its offers.
Does selling a policy affect its cash surrender value comparison?
A settlement offer is meant to exceed the policy’s cash surrender value — otherwise surrendering directly to the insurer would be the simpler, better option.
