How to Choose A Life Settlement Company

Selling a life insurance policy through a life settlement is a process most people will experience only once in their lives. It’s becoming a mainstream financial product as seniors seek new ways to fund their retirement.  ​

Selling a life insurance policy through a life settlement is a process most people will experience only once in their lives. It’s becoming a mainstream financial product as seniors seek new ways to fund their retirement.  
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There are two main types of companies in the life settlement industry. Brokers work on behalf of the original policy owner to find a buyer for the policy. While they don’t charge fees upfront, the policy owner pays a commission to the broker if they decide to sell the policy. Providers work for investors, or groups of investors, that purchase life insurance policies from individuals and from brokers.  
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Because it’s unfamiliar territory, and to get the best possible offer for their policy, many people choose to use a life settlement broker. This relationship is completely optional. Whether you use a broker to facilitate the sale of your life insurance policy depends on your personal goals, how familiar you are with the life settlement process, and personal preference.  
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If you decide to go directly to a provider 
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Providers hold special licenses that allow them to legally purchase multiple life insurance policies on behalf of investors. Some providers are also investors. In any case, a life settlement investor will always use providers for origination. Providers calculate their offer for life insurance policies by using algorithms that consider the insured person’s life expectancy, current interest rates, and the characteristics of the policy.  
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If the provider is FINRA registered and licensed as in investor, they can resell life insurance policies after purchasing them. They may also sell fractional interests in life insurance policies.  
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If you decide to go through the life settlement process without the help of a broker, you’ll need to choose a provider on your own. This method of selling your life insurance policy bypasses broker’s fees that may be as high as 30% of the total sale price. It may also speed up the process since you won’t be waiting for a broker to solicit multiple competing offers for the policy.  
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Finding a company to buy your life insurance company can be difficult for people who aren’t familiar with the industry. If you decide to start the process without the help of a broker, consult an accountant to learn about your potential tax liability and a financial advisor with experience in life settlements to help you understand your state’s rules about selling life insurance to investors.  
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A financial advisor can also inform you about how receiving money from a life settlement may affect your eligibility for government assistance if you receive it. They can also review your current financial situation and talk with you about whether creditors may have a claim on proceeds from your life settlement.  
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Remember that the first offer may not be the best offer, so although it may take longer, it pays to get an estimate of what your policy is worth from more than one provider.  
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If you decide to speak with a broker 
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In most states, life settlement brokers must hold a valid license issued by the state where the policy owner lives. Before choosing a broker, find out whether they are licensed to conduct business in your state. Ask potential brokers if they will actively seek qualified buyers to get the best possible offer for your policy, or if they work with only a few specific providers.  
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Brokers should market your life insurance policy to providers that are large institutional investors. These buyers have experience with risk management and can ensure privacy throughout the entire transaction. Your broker is your single point of contact. You’ll fill out one application and the broker will send it to the companies they feel are likely to offer the most money for your policy.  
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The process may take longer if you use a broker because they’ll negotiate with multiple providers. An experienced life settlement broker understands the marketplace and how best to present your policy to potential investors.  
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A reputable broker will offer to speak frankly about their commission rates and offer you the information in writing. The largest commission they are allowed to charge by law is 30%. You should never be asked to pay fees upfront. The broker will handle all fees associated with processing your medical records, hiring an independent life expectancy underwriter, and contacting your insurance company for details about your policy.  
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The broker will openly discuss their company’s privacy policies as they apply to your personal and private information. To get offers from providers, they must share your medical records, personal information, and policy information with them.  
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When you receive offers from providers for your life insurance policy, your broker will present them to you in writing. They should be transparent about who the buyers are, as well.  
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No matter which life settlement company you choose, remember that this is a well-regulated industry with laws to protect the privacy and financial interests of consumers. In 43 states, there are laws about life settlements. In some states, consumer protection rules state that insurance companies must inform their clients about the life settlement option as an alternative to letting the policy lapse or surrendering it in exchange for the cash value.  
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Choosing a provider or broker is a personal decision. If you aren’t sure what to do, it may help to speak with more than one broker to find out what services they offer, their track record with previous clients, and their rates.  
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No matter which route you choose, remember that you are never obligated to sell your life insurance policy. Most states have laws that ensure that the policy owner is in control during the entire life settlement process. Even after you receive the funds and sign over the policy to the provider, you have a period during which your allowed to change your mind, return the money, and resume ownership of your life insurance policy.  ​