If you are considering a viatical settlement, you may be curious about how much money you could receive from your policy’s sale. Here are a few factors that go into the payout calculation.
- Life expectancy: The estimation of the insured’s remaining life based on their medical diagnosis and age is a key determining factor of viatical settlement payouts. The greater an insured’s life expectancy, the more premium payments the provider expects to make before receiving the death benefit. The more a provider expects to pay, the less money they will allot to the upfront settlement payout.
- Sum of remaining premium payments: When providers spend more on expensive premiums, they have less to spend on the payout for your sale. For this reason, more expensive premium payments generally result in lower viatical settlement payouts.
- Size of insurance policy: The size of a life insurance policy is reflected in the size of the death benefit triggered when the insured dies. With larger policies, providers typically provide a larger payout for policyowners because they know they will receive a considerable cash sum upon the insured’s death.
- Type of insurance policy: Viatical settlements do not require a specific type of life insurance. However, the different policy types can come with varying payouts. There are two broad categories of life insurance: permanent life insurance—which includes whole, variable, and universal life insurance—and term life insurance. Because providers are required to pay more than the cash surrender value, the total amount paid as a percentage of the death benefit may be higher than a policy with no surrender value.
Though policyowners will need the services of a licensed provider to determine the exact payout their policy would earn, these criteria can help policyholders understand how their situation may impact the payout amount.