A life settlement can be used as a safe escape option when the dire need for funds arises. You can sell your life insurance policy for cash and pass on the benefit to the one who purchases it. Since it is difficult to find direct buyers, the existence of a life settlement provider and broker helps in the need of the hour.
There can be many reasons why anyone will want to sell life insurance policy like they cannot afford to pay premiums anymore; they don’t need the policy anymore, urgent need of funds, want to set any business, want to be debt-free.
So first of all whom to sell your policy? Life settlement provider or a broker?
Brokers usually find a buyer in lieu of a fee adding to expenditure. The point to consider is that even life settlement brokers approach to the bigger brokerage firms to get the most competitive bid.
In most cases, Life settlement provider purchases the policy directly or tie-up with a life settlement broker to buy the policy. Life settlement companies buy the policies on behalf of large investors with diversified portfolios.
However, in both cases, the guidance is provided by the broker as well provider step by step and fee involved in each of them, for better and in-depth information you can visit the Life Insurance Settlement Association.
While choosing the best Life Settlement Provider there is many factors to be kept in mind so you can get the maximum value on your policy. But you can make a good decision of you follow a few steps
Sellers should make sure to deal with licensed and experienced life settlement companies with years of experience and a good track record with positive feedback. An in-depth understanding of selected company licensing, bonding, and insurance can save you from being falling into a trap.
You should know the thing like how long it takes to process the entire thing, what are the tax implications, the information about new policyholders, how will be the confidential information be tackled during and after the sales well in advance is a smart move.
Licensed life settlement providers are regulated by state regulatory authorities ensures the protection and safety of the seller during and post-sale. Due to the licensing, you can have to trust them because the principles, internal policies and procedures have been verified by a regulatory authority. Apart from this, the firm must be bonded that protects the policyholder.
Timing and the Taxes
A life settlement is not the quickest way to get cash, it rather takes weeks or even months, so the need for the cash of decision to sell the policy must be anticipated well in advance.
The need for the cash for an illness you can opt for a viatical settlement, to be able to qualify to viatical settlement the life expectancy of the policyholder must be less than two and there are no taxes involved in this kind of settlement.
Policyholders must consult a trusted financial advisor to know about the tax implication before selling their policies. Life settlement Firms cannot advise sellers on policyholders’ specific tax liabilities.
It is important to check with the life settlement company if they will provide written confidentiality agreements and have systems in place to protect policyholders’ confidential information such as confidential health and insurance records. Rules can limit the company’s frequency to contact the seller.
A life settlement provides purchase life insurance policies as a substitute to bond, and real estate investments. It is always good to know about the funding source of the company, Large, institutional investment companies provide better confidentiality to the seller. The seller’s policy is part of a bundle of other policies and investments and that ensures that there is no vested interest in the seller’s death
Selling a life insurance policy requires legal and financial transactions and is complex and time-consuming. Working directly with a life settlement provider has few benefits.
- The first is you don’t have to undergo an unwanted complicated process.
- Next is the transaction tends to be completed quickly as the company is well aware of the procedure thus eliminating the chances of mistakes.
- Apart from making the process smooth and fast, the providers help cut the extra cost of the intermediaries’ commissions
- Providers are experts in evaluating the quality of a life insurance policy and they are well aware of the value of the policy at which it would be sold.
Selling the Policy to Broker
- Life settlement brokers need to disclose all fees involved in the transaction beforehand.
- Life settlement brokers charge either a percentage of the face value of a life insurance policy or a percentage of the sales proceeds brokered.
It is at the discretion of the seller whether a seller chooses directly with a life settlement provider or life settlement broker, detailed research would recommend though. For more information on life settlements, please feel free to contact us.