What a life expectancy report actually is, and why you should ask to see yours
One document drives the price of your policy more than anything else about it. Most sellers never read it, and many do not know it exists.
What it is
A life expectancy report is a medical underwriting assessment produced by a specialized firm — not your doctor, not the insurance company, but a third-party company whose business is estimating how long people with specific health profiles are likely to live.
The firm reviews your medical records, applies actuarial tables and proprietary models, and produces a number: your estimated life expectancy in months, along with a probability distribution showing the range of outcomes. The buyer uses that number to calculate the present value of the death benefit, which is the ceiling on what they will pay for your policy.
Why it matters more than the face value
Two policies with identical face values and identical premiums can receive very different offers if the life expectancy estimates differ. A policy on someone estimated to live 8 years is worth less to a buyer than a policy on someone estimated to live 4 years, because the buyer has to keep paying premiums for longer before collecting the death benefit.
This is counterintuitive to most sellers. You might expect that being healthier would make your policy more valuable. In this market, the opposite is true: a shorter life expectancy estimate produces a higher offer, because the buyer's investment horizon is shorter and their carrying costs are lower.
A shorter life expectancy estimate produces a higher offer. The buyer's investment horizon is shorter and their carrying costs are lower.
Who produces these reports
A small number of firms dominate this market. The two most widely used are 21st Services and AVS Underwriting. Both are independent of the buyers and brokers who commission their reports, but both are paid by those buyers and brokers, not by sellers.
That relationship does not mean the reports are biased — these firms have strong reputations to protect and their methodology is audited. But it does mean the report was commissioned by someone with an interest in the outcome, which is a reason to understand what it says rather than accepting it as a neutral fact.
How to get a copy
You are entitled to a copy of any life expectancy report commissioned in connection with the sale of your policy. Ask for it in writing before you sign anything. A licensed broker is required to provide it in most states.
When you receive it, look at two things: the median life expectancy in months, and the range. A report that says 72 months median with a wide range (say, 36 to 144 months) is telling you something different from one that says 72 months with a narrow range. The buyer prices to the median; the range tells you how much uncertainty is in that number.
When a second opinion is worth the cost
A second life expectancy report from a different firm costs between $500 and $2,000 depending on the complexity of your medical history. On a policy with a $500,000 face value, a difference of 12 months in the median estimate can translate to a difference of tens of thousands of dollars in the offer.
If the first report's estimate seems inconsistent with your own health history — if you have conditions that are well-managed, or if the report appears to weight certain diagnoses heavily — a second opinion is worth considering. We can help you think through whether the numbers warrant it.
Larry Hoffman
Larry Hoffman has spent over 20 years in legal funding and commercial lending. He runs Zen Cash, which reviews life insurance policies and refers qualified ones to a licensed life settlement broker. Zen Cash does not buy policies and is not a licensed broker. More about how this works.
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