BECAUSE WE BELIEVE THAT TRUTH AND INTEGRITY ARE THE BEST FORMS OF FINANCIAL ADVICE:
Insurance is not only a property; it is also an important asset that can be worth a lot of money. The goal of owning an asset is to maximize its value. In the US and Canada, policy owners cancel more than 120 billions of dollar in insurance without having a clue about the value of their insurance as an asset. This is not the fault of the policy owner. This is the result of insurers restricting access to information in order to increase their margins of profits from these insurance lapses and cancellations. We want to change this. We want the value of insurance policies to go where it belongs; in the pocket of policy owners. This is why we are offering a free calculator to the public. What is the value of a life policy as determined by this calculator? It is called the Fair Market Value (FMV). The FMV is determined by calculating the replacement value of the life insurance. The best way to explain this is through an example:
Example: John is the policy owner of a T100 with a death benefit of $200,000 where premiums are paid for life and where there are no cash values. He took the policy at age 55 thinking it would be nice if his children could get a little something when he becomes an angel. The premium is $2,500 per year. He is thinking about cancelling the policy because his children are well off and there is no need for it anymore and he could use the premium savings. If he cancels the policy to save $2,500 annually; he will get no cash values from the insurer. Luckily he came across our calculator finding that the same policy would cost him a minimum of $12,500 annually if he was healthy and a lot more if his insurability was bad. The difference of $10,000 between the current premium and replacement premium results in a Fair Market Value of $100,000. Basically if he liquidates the T100, he will be giving away $100,000 to the insurer. Now that he knows about the value of his policy, he can look at various strategies from charitable giving to selling his policy to a third party in order to extract the $100,000 out of the policy for his own benefit.
What is the FMV?
Life insurance is an asset and like any assets, it has many different values. The FMV of a life insurance policy is the amount that an informed third party dealing at arm’s length would be willing to offer to purchase the life policy in question.
Normally to determine the FMV of a policy, a policy owner would hire an actuary to do the valuation. Usually the process would start with a pre-evaluation which is a rough estimate of the FMV. The cost is $250 to $500. This estimate is then used to decide whether there are any benefits in ordering a full valuation which usually cost around $2,500.
Our calculator replaces the pre-evaluation which will save time and money ($250 to $500). iT provides an estimate of the value of the death benefit. However it does not include the value of any other guaranteed benefits such as interest guarantee, paid up additions… The values of such guarantees should be determined through a full evaluation.
To learn more about Life Settlement, we have written everything you need to know:
Insurance Audit: Financial advisors know little about managing insurance
Life settlement: Industrial Alliance – Where insanity and stupidity comes together…
Why are Canadian insurers truly afraid of an organized life settlement market?
FSCA shed some light on the issue of life settlement
Answering insurer’s statements regarding life settlements in the Insurance Journal
LIFE SETTLEMENTS IN CANADA: RIGHT OR WRONG?
Can I sell my life policy anywhere in Canada?
Insurance Valuation or Insurance Audit?
1. Past review of the history of the policy to determine the effectiveness of how the policy was sold and manage.
2. Determination of the current Fair Market Value of the policy using the Replacement Value approach. Click here to understand why determining the replacement value life insurance is the only right approach to determine the Fair Market Value of a policy
3. Determining the future Fair Market Value under different scenarios allowing you to decide whether it would be more advantageous to enter into a life settlement now versus in the future.
4. Click here to understand why you should be careful in using an actuary to get a life insurance audit of your policy.
5. Click here to understand what you should consider before employing an insurance expert in a civil trial against an insurer which could cost you more than $40,000
Use MRFMV to find out the true value of your insurance
Instructions: Premiums entered are premiums to age 100.
T100 = T100 premium including any rating as % or rate per 1000 if it was/is a permanent rating
Universal Life Level Cost of insurance = Minimum premium including any rating as % or rate per 1000 if was/it is a permanent rating
Universal Life Yearly Cost of insurance = Level premium to age 100 including any rating as % or rate per 1000 if it was/is a permanent rating
Whole life guaranteed premium to age 100 = premium including any rating as % or rate per 1000 if it was/is a permanent rating
If you you do not know what would be the cost of purchasing new insurance, you can use our preloaded premiums which are based on T100 premiums. Interest rate should be between 2% to 5% and should be based on long term bonds yield. The lower the interest used, the greater the FMV will be.