Life Settlement: Get the Best Value for Your Unwanted Life Insurance Policy

For the term life settlement, an apt description would be the settlement of an insurance policy which is otherwise unwanted. Here, a third party is involved who gets all the benefits on the maturation of the policy. The premium payments on the policy are the new owner’s responsibility now. A secondary market for life insurance has opened through which the policy-owners can get a fair market value for their policies. This saves them from accepting a lower value on their cash surrender from any life insurance company. As the settlement policies involve the complex financial transactions, these are conducted by the financial advisers like an accountant/CPA’s, Financial Planners, Wealth Managers, Insurance Advisors, etc. The financial advisers seek the services of a settlement broker, in case they don’t want to submit their cases directly to the settlement provider.

The life settlement brokers are an important link in the chain starting from the seller to the end buyer of the policy. Known as the life settlement provider, they facilitate a smooth transaction of the policy. In lieu of a fee amount, brokers go around the market to sell the policy to multiple providers just like a real estate broker. The cases are sold to the reputed buyers by them to get the best value out of the unwanted policy, owned by the policy owners. The financial advisers will only settle for highest possible price through an experienced settlement broker. Life settlement involves the services of a broker who collects the bids, yet it is important for the financial adviser to assist the client in matching the offers against a number of criteria. Notable amongst these are offer price, stability of funding, privacy provisions, net yield after commissions etc. Mostly, life settlement policy is for the high-net-worth policy owners aged 65 or older. It is reported that about 20% of the policies have a market value exceeding the cash value offered by the owner.

The entire process of transaction proceeds in stepwise manner whereby first the policy-owner consults an adviser. After making a decision to sell his/her policy, they together discuss the possibility of going directly to the brokers or the providers. The client is required to provide his medical information and if the policy meets the life settlement criteria, providers then send the offers directly or through the broker. After reviewing a number of offers, the client accepts any preferred offer of his/her choice. The paperwork is verified first, before handing over the change of ownership forms to the insurance carrier.

The charges vary greatly and should be fully discussed with the broker, so that the complexities are avoided later. It should be clearly understood whether employing the services of a broker will be beneficial to the client. Usually, in most of the cases, the brokers are licensed to proceed ahead with their business. Certain regulations and rules have to be met in many states, which include procedure, privacy, licensing, disclosure and reporting, failing, which those might invite penalties. A life settlement ensures doing away with the unnecessary while availing best of the financial benefits.