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Insurance policy valuation: what decides resale value

A buyer prices a policy from what it will pay out, not from what your insurer would pay you to end it. Here is how that works, and why offers differ from one buyer to the next.

How a buyer works out a price

  1. Start with the guaranteed maturity benefit and the bonuses already added.
  2. Count projected bonuses for less, because they may not be paid.
  3. Take off the premiums still to pay.
  4. Work the result back to today at the return the buyer needs. Each buyer sets its own.
  5. Compare with the net surrender value. If the price is not higher, a sale does not help you.

Worked exampleIllustration

Net surrender value todayS$30,000

Guaranteed at maturity, in 4 yearsS$40,000

Premiums leftNone

Worth today at a 5% yearly returnS$32,908

A possible offerS$31,500

S$1,500 above surrender value. The gap to S$40,000 is not profit: four years of waiting, costs and risk sit in it.

What moves the price

Guaranteed benefits

The larger the guaranteed maturity benefit and the bonuses already added, the more the policy is worth.

Time to maturity

Fewer years to wait means less discounting. Buyers usually look once about a third of the term has passed.

Premiums left

Every premium still to pay comes off the price. Fully paid policies are the clearest case.

Insurer and fund

The insurer, and how its participating fund has paid bonuses, shape how projected bonuses are counted.

Loans and charges

Policy loans, interest and any surrender charges come off, just as they would on surrender.

A clean title

Cash-funded, owned by you, with no trust nomination, pledge or earlier assignment.

Why offers differ between buyers

  • Each buyer sets the return it needs, and a lower required return means a higher price.
  • Some count projected bonuses more generously than others.
  • Some hold policies to maturity, as we do; others resell them to investors.
  • Some do not buy certain plans or insurers at all.

What we put in every offer

  • Our price, in writing.
  • Your net surrender value, printed beside it.
  • Every condition of the purchase.
  • How long the offer stands.

How we make money

Find out what your policy is worth to us

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