What term describes the single sum of money that equals the discounted value of future payments?

The term that describes the single sum of money that equals the discounted value of future payments is known as the commuted value of an insurance policy. This concept is crucial in the context of life insurance and annuities, as it represents the present value of expected future cash flows from the policy, discounted at an appropriate interest rate.

When assessing the commuted value, the future payments the policyholder is expected to receive, such as death benefits or annuity payments, are considered. By applying a discount rate, these future cash flows are converted into a single present value amount, which can help determine the fair value of the policy or aid in making decisions related to policy management.

In contrast, the other terms do not accurately capture this financial concept. The life settlement value refers to the amount a policyholder can sell their policy for, which may not be equal to the discounted future payments. The policy surrender value is the amount a policyholder receives if they choose to cancel their policy early, which again may differ from the present value of future benefits. Lastly, the future value of an insurance policy represents the amount the policy would be worth at a specified date in the future, not the present value of those future payments. Therefore, the commuted value is