How to Use This Calculator
- 1
Enter Face Value of Policy
Input the total death benefit amount specified in your life insurance policy.
- 2
Enter Age of Insured
Input the current age of the insured person. Settlement offers increase significantly after age 65.
- 3
Select Health Status
Choose the insured's current health rating. Shorter life expectancy generally increases settlement offers.
- 4
Select Policy Type
Choose between Universal Life, Whole Life, or Term/Convertible. Permanent policies qualify for higher settlements.
- 5
Enter Annual Premium
Input the yearly premium cost you pay to maintain the policy.
- 6
Optionally expand Advanced Options
Set outstanding loans against the policy, cash surrender value, and additional benefits or riders for a more detailed analysis.
- 7
Review your results
Examine the Estimated Settlement, Settlement % of Face Value, Net After Loans, Gain Over Surrender, and Annual Premium Savings.
Example Calculation
A 72-year-old policyholder in average health with a $500,000 universal life policy, $50,000 in outstanding loans, $20,000 cash surrender value, $10,000 in riders, and a $6,000 annual premium wants to estimate the settlement value.
Face Value of Policy ($)
500,000
Age of Insured (years)
72
Health Status
Average
Policy Type
Universal Life
Annual Premium ($/yr)
6,000
Outstanding Loans Against Policy ($)
50,000
Cash Surrender Value ($)
20,000
Additional Benefits or Riders ($)
10,000
Results
Estimated Settlement
$100,000
Settlement % of Face Value
20.0%
Net After Loans
$50,000
Gain Over Surrender
$80,000
Annual Premium Savings
$6,000
Tips
Age Is the Biggest Factor
Settlement offers increase substantially with age. A 72-year-old with average health might receive 15–25% of face value, while an 85-year-old could receive 30–45%. If you're under 65, most providers won't make an offer.
Compare Settlement to Surrender
Use the Gain Over Surrender result to see how much more a settlement offers versus simply canceling the policy. In our example, the settlement yields $80,000 more than the $20,000 cash surrender value.
Health Status Cuts Both Ways
Better health means lower settlement offers because investors expect to pay premiums longer. If your health has declined, you may qualify for a significantly higher offer than the calculator's average estimate.
Get Multiple Quotes
This calculator provides an estimate based on industry averages. Actual offers vary widely between settlement providers. Always obtain at least 3 quotes and consider working with a licensed life settlement broker.
The Life Insurance Settlement Calculator helps policyholders estimate how much they could receive by selling their life insurance policy to a third-party investor.
Unlike simply surrendering a policy for its cash value, a life settlement considers the insured's age, health, and policy type to estimate a realistic market value.
For example, a 72-year-old in average health with a $500,000 universal life policy could expect a settlement around $100,000 (range: $75,000 – $125,000), which is $80,000 more than the $20,000 cash surrender value.
Why Your Life Insurance Policy May Be Worth More Than You Think
Many policyholders don't realize that their life insurance policy is a financial asset that can be sold on the secondary market.
If your coverage needs have changed, premiums have become burdensome, or you need liquidity for medical expenses or retirement, a life settlement can unlock significantly more value than surrendering the policy.
The life settlement market has grown substantially, with settlements averaging 4 to 8 times the cash surrender value according to industry data.
Understanding your policy's potential market value is the first step toward making an informed decision.
How the Settlement Estimate Is Calculated
The calculator estimates settlement value as a percentage of the policy's face value, adjusted for three key factors:
Base Settlement Percentage by Age:
| Age Range | Settlement Range (% of Face Value) |
|---|---|
| Under 65 | 5% – 10% |
| 65–69 | 10% – 18% |
| 70–74 | 15% – 25% |
| 75–79 | 20% – 32% |
| 80–84 | 25% – 38% |
| 85+ | 30% – 45% |
Health Status Modifier:
- Excellent: 0.70× (lower offers due to longer life expectancy)
- Good: 0.85×
- Average: 1.00×
- Below Average: 1.25×
- Poor: 1.55× (higher offers due to shorter life expectancy)
Policy Type Modifier:
- Universal Life: 1.00×
- Whole Life: 1.05×
- Term/Convertible: 0.80×
The formulas are:
Settlement % Low = Base Low × Health Modifier × Policy Modifier
Settlement % High = Base High × Health Modifier × Policy Modifier
Estimated Settlement = Face Value × (Settlement % Low + Settlement % High) / 2
Net After Loans = Estimated Settlement − Outstanding Loans
Gain Over Surrender = Estimated Settlement − Cash Surrender Value
Worked Example: Estimating a Settlement for a $500,000 Policy
A 72-year-old policyholder in average health owns a universal life policy with:
- Face value: $500,000
- Outstanding loans: $50,000
- Cash surrender value: $20,000
- Additional riders: $10,000
- Annual premium: $6,000
Step 1: Determine the base settlement percentage for age 72. Age 70–74 bracket: 15% – 25%.
Step 2: Apply modifiers. Health modifier (Average): 1.00×.
Policy modifier (Universal): 1.00×.
Adjusted range: 15% – 25% (unchanged in this case).
Step 3: Calculate the settlement estimate.
- Low estimate: $500,000 × 15% = $75,000
- High estimate: $500,000 × 25% = $125,000
- Mid estimate: ($75,000 + $125,000) / 2 = $100,000
Step 4: Calculate net proceeds.
- Net After Loans: $100,000 − $50,000 = $50,000
- Gain Over Surrender: $100,000 − $20,000 = $80,000
- Annual Premium Savings: $6,000 per year no longer owed
The estimated settlement of $100,000 represents 20.0% of the face value and is $80,000 more than the cash surrender value.
Key Factors That Drive Settlement Offers
Life Expectancy is the single most important factor.
Settlement providers use medical underwriting to estimate how long they'll need to pay premiums before collecting the death benefit.
A 72-year-old in average health has a significantly different settlement value than an 80-year-old with chronic conditions.
Premium Burden matters because investors must continue paying premiums after purchasing the policy.
Policies with high annual premiums relative to their face value receive lower offers, since the investor's total cost is higher.
Policy Type affects qualification and value.
Universal life policies are the most commonly settled because their flexible premium structure is attractive to investors.
Whole life policies may receive slightly higher offers due to guaranteed cash value growth.
Term policies are harder to settle but may qualify if convertible.
Interest Rate Environment also plays a role.
When interest rates are higher, the present value of the future death benefit decreases, potentially lowering settlement offers.
Conversely, lower rates can increase the attractiveness of life settlement investments.
Alternatives to Consider Before Settling
Before accepting a life settlement, consider these alternatives:
- Reduced paid-up insurance: Convert your policy to a smaller death benefit with no further premiums required.
- Accelerated death benefit: If terminally or chronically ill, your policy may include a rider that pays a portion of the death benefit while you're alive.
- Policy loan: Borrow against your cash value without giving up the death benefit entirely.
- 1035 exchange: Transfer the cash value to an annuity or different insurance product tax-free.
A life settlement should typically be a last resort after evaluating these options, as it permanently eliminates the death benefit for your beneficiaries.
Frequently Asked Questions
What is a life insurance settlement?
A life insurance settlement is the sale of an existing life insurance policy to a third-party investor for a lump-sum cash payment. The buyer assumes future premium payments and receives the death benefit when the insured passes away. Settlement amounts typically range from 10% to 45% of the face value, depending on age, health, and policy type.
Who is eligible for a life insurance settlement?
Eligibility typically requires the insured to be at least 65 years old with a life expectancy of 15 years or less. The policy usually needs to be a permanent policy (universal or whole life) with a face value of at least $100,000. Some term policies may qualify if they are convertible to permanent coverage.
How does health status affect my settlement value?
Health status significantly impacts settlement offers. Poorer health (shorter life expectancy) generally increases the offer because the investor expects to pay fewer premiums before receiving the death benefit. For example, a policyholder in poor health might receive over twice as much as someone in excellent health with the same policy.
Are life insurance settlements taxable?
Yes, life insurance settlements can be taxable. The portion exceeding your cost basis (total premiums paid) may be subject to ordinary income tax, and any amount exceeding the policy's cash surrender value could be taxed as capital gains. Tax treatment varies by state, so consult a tax advisor before proceeding.
How does a settlement compare to surrendering my policy?
A life settlement typically pays significantly more than the cash surrender value. In our example, a $500,000 policy with a $20,000 cash surrender value could yield an estimated $100,000 settlement — $80,000 more than surrendering. The tradeoff is that your beneficiaries lose the death benefit.
What types of policies qualify for a settlement?
Universal life and whole life policies are most commonly settled and tend to receive the highest offers. Term life policies may qualify if they have a conversion option to permanent coverage. Group life insurance policies generally do not qualify unless they can be converted to individual policies.