How much can insurance carriers offer to buy back life insurance policies?
Life insurance contracts define the maximum value the issuing life insurance company may pay to redeem a policy as the cash surrender value (CSV). In addition, many policies have significant back-end contractual termination charges that can reduce this surrender payout by as much as 100% of the CSV. These termination charges often eliminate any cash payout from the insurance company at the time a policy is surrendered. Because the life settlement buyer keeps the policy in force by paying premiums, these termination charges are never triggered. Life settlement buyers and their medical underwriters take into consideration the insured’s current medical condition. The insurance company however, is only allowed to consider the insured’s medical condition when the policy was originally issued. Because of this, life settlement buyers are able to pay more than the insurance company.
