Who Does a Life Settlement Broker Represent?
Friday, January 29, 2021
by: Jon B. Mendelsohn CEO, AsharGroup.com

Section: Financial Advisors

Helping a client sell their unwanted or unaffordable life insurance policy can be a daunting task. You want to provide them the best solution and the best price for their life insurance policy, however, you may not have the experience or knowledge to do so. There’s quite a bit of information to take in and there might not be a clear route to take based on your client’s history and their needs and wants. This is where a licensed life settlement broker comes in. Similar to working with a specialist in other planning needs, the most experienced companies are 100% exclusive to the life settlement market, analyzing thousands of policies each year as they provide an inside advantage to policy owners. Learn who a life settlement broker represents and how they can help your clients.

What is a Life Settlement?

life settlement is the sale of an existing life insurance policy to a third party for more than its cash surrender value and less than its net death benefit. In a life settlement transaction, the policy’s owner transfers ownership of the policy to the buyer in exchange for an immediate cash payment or, in some instances, reduced interest in the death benefit. The buyer of the policy pays all future premium payments and receives the death benefit when the insured passes. Similar to other financial services transactions, this is a highly regulated process and all required privacy protections and transparency requirements are met along the way.

What is a Life Settlement Broker?

A life settlement broker is a licensed seller’s representative in the transactional process who facilitates the policy auction process on behalf of the policy owner. A broker’s role is to create as much competition as possible between licensed buyers so the seller receives the best offer possible. Life settlements are regulated by state law, so the life settlement broker that you use must be licensed in your specific state. Although working with a broker might extend the overall bidding process, the end result could deliver a much higher value to the seller than a single offer from a direct-to-consumer buyer. Life settlement brokers have the resources to know what a policy should be worth, so having that inside advantage can give consumers the confidence that they received the maximum value for their policy.

Who Does a Life Settlement Broker Represent?

Similar to selling your home or other assets, there are two sides to every transaction. A life settlement broker is licensed as a fiduciary to represent the policy owner. Their process is structured to assist the family, business, and advisors to ensure the best decisions are being made for the client. Brokers must do what’s in the best interest of the seller. A licensed broker will work with the policy owner to provide guidance and an advantage through the underwriting, negotiation, and contracting process. In exchange for helping guide the policyholder through the life settlement process, the broker will earn a fee as part of the transactional process. They win as the client wins. On the opposite side of the transaction from the client is the buyer/provider. They act as a fiduciary to investors that are purchasing policies from the seller. Buyers/Providers must do what’s in the best interest of the investor. An important role of a life settlement broker is to have the proper due diligence when selecting a buyer. This ensures that there is certainty with the offer and all regulatory and privacy requirements are being met.

Working With a Life Settlement Broker

When choosing to have a life settlement broker represent your client, the process will be very simple and straightforward, as he or she takes care of the majority of the work, gathering information from the life insurance carrier and medical facilities. After contact, the broker will discuss goals with the policyholder and what they anticipate the outcome will be. Then, the broker will present the policy to multiple buyers in an auction format to generate as much interest as possible.

He or she will manage the policy auction through several rounds of bidding, creating competition, and driving up the price that the policyholder will be paid for the policy. Once there is a winner, the broker will facilitate the contracting process to ensure all requirements are met in a timely manner until the policyholder receives their cash settlement.

With all of the concerns around elder financial abuse, it is critical to have representation by a licensed broker that can facilitate and translate the process so the best interests of the seller are being met. Working with a life settlement broker might be the best route for your client to get the highest payout for their life insurance policy. Use our Find an Authorized Member Tool to learn about the different brokers available to help.