CHAPTER 2. LIFE SETTLEMENT COMPANIES – BROKERS AND PROVIDERS
Selling a life insurance policy isn’t as simple as placing an ad in the local paper or on the internet. It can be a sophisticated process and one in which many financial advisors don’t specialize. In the life settlement industry, then, there are two main types of agents or companies that can help you sell your life insurance – providers and brokers. These two types of companies help facilitate the sale of private property – the life insurance policy – and make sure the transaction between seller and buyer goes smoothly.
Life settlement providers are companies which have licenses allowing them to buy life insurance policies for large institutional investors. Sometimes these roles are combined into one – a life settlement provider may also be the investor. Life settlement providers will evaluate the quality (from an investor’s point of view) of a life insurance policy, after which they may make a bid for the policy based on the specific details of the policy, the life expectancy of the policyholder, and the current interest rate environment. After they acquire the insurance policy, providers will often resell them or sell fractions of them to groups of investors. These are the recommended buyers to deal with – due to strict regulation and quality controls, these large companies will make better partners in a life settlement transaction.
Brokers are the partners you should pick with the most care – a good life settlement broker is worth their weight in gold. Brokers represent the life insurance policy seller to any and all prospective buyers. They are professionals who know the industry and the game well and will help you navigate any potential pitfalls and avoid bad deals.
Currently, the field of life settlement brokers is made up of many small brokerages throughout the United States. Some are licensed in states that have laxer regulations regarding life settlements, while others are licensed in stricter states. If you want the safest experience, it’s recommended you go with a broker that is licensed to operate in the states with the more stringent regulation of life settlements (and thus, more protection for the seller.)
It is possible to sell a life insurance policy by yourself, without the services of a broker, but that should be approached with great care and thoroughness. The upside is that you don’t have to pay the broker a commission from the sale, but the drawback is that you will have to go through the often-complex and arcane paperwork yourself.
In the early days, before the life settlement industry was properly regulated, it gained notoriety for brokers who took exorbitantly large commissions from desperate seniors. Nowadays, though, commissions are strictly regulated on a state level and have to be disclosed upfront by the brokerage company. The maximum commission is capped at 30% in most states, and some brokers charge less than this. Finding out what commission the broker you’re considering working with is probably priority number one for anyone who has decided to sell their life insurance policy.
Life settlement brokers can be a bit like real estate agents – the good ones will take care of you and get you a great deal on your life insurance policy. The mediocre ones might be in it more for themselves and might try to push you to take the first offers that come along so that they can collect their commission faster.
It all comes down to your ability to discern a broker who has your interests at heart from one who is only interested in themselves and their commission. Make sure to do your due diligence – find out how long they have been in business, whether their license has ever been revoked, ask if they can put you in touch with past clients whose life insurance they helped sell.
Speaking of licensing, make sure your broker is licensed to work in the state that you’re looking to sell your life insurance in. A broker who is not fully licensed to work in the state may have to pass the whole process – essentially, subcontract out – to another brokerage, which may not be what you’re looking for or meet your standards. It’s always important to spend time and effort to pick a good broker – they will be your guide through the array of documents, signings, and other processes that are a part of a life settlement.
Finally, and last but not least, make sure your broker will be sending the health and insurance records necessary to move ahead with the life settlement process only to the companies that need to see them. In life settlements, these are life insurance providers and life expectancy underwriters. Nobody else needs to see your confidential records.
INTRODUCTION TO LIFE SETTLEMENTSCHAPTER 2.
LIFE SETTLEMENT COMPANIES – BROKERS AND PROVIDERSCHAPTER 3.
СOMMON CONCERNSCHAPTER 4.
WHO QUALIFIES FOR A LIFE SETTLEMENT?CHAPTER 5.
HOW MUCH IS MY LIFE INSURANCE POLICY WORTH?CHAPTER 6.
ALTERNATIVES TO LIFE SETTLEMENTSCHAPTER 7.
THE LIFE SETTLEMENT PROCESS