Life Insurance Valuation
Our model is designed to capture the present value of the future economic benefits (cash flows) to be generated from the life insurance policy. Our valuation is based on a year-by-year probabilistic analysis, which is the only acceptable method allowed by the IRS. The value of a life insurance policy may be directly affected by the following factors:
- Age of insured
- Amount of cash withdraws or loans expected to be taken form the policy
- Amount of the death benefit
- Amount of the policy premiums
- Credit worthiness of insurance carrier
- Required rates of returns historically generated by publicly traded common stock
- Risk associated with the policy premiums being paid in the future
- Term remaining on the policy
- Timing of the cash withdraws or loans to be taken from the policy
- Timing of the policy premiums
- Timing of the payment of the death benefit based upon the actuarial life tables
- Volatility of the S&P 500 and the expected returns of the policy