Life insurance polices offer peace of mind for you and your family. But what happens if you no longer need the protection?
You’ve got three choices: Lapse, surrender or settlement. If you let your policy lapse, you simply stop paying premiums. Your policy is no longer valid, and you receive nothing. Surrender means cancelling your policy and receiving a lump-sum payment, known as the cash surrender value. Settlement is the process of selling your policy to a third-party buyer or investor. As a general rule, you can expect to receive four to seven times more from a life insurance settlement than from a cash surrender.
Brokers and providers both offer a path to selling your life insurance policy, butvary widely in their transparency, pricing, experience, compliance and service. Selling with reputable, reliable companies helps maximize your settlement value; selling with the wrong company can mean leaving tens of thousands on the table.
Here’s what you need to know about choosing the right company to trust with this major financial decision.
LIFE SETTLEMENTS CAN BE VALUABLE — BUT NOT ALL COMPANIES DELIVER THE SAME RESULTS
If you own life insurance you no longer need, you have the right to sell the policy. This was confirmed over a century ago by the U.S. Supreme Court in Grigsby v. Russell (1911), which recognized that life insurance policies are considered personal property.
While there are regulations that govern life insurance settlements, they vary by state, and even strong oversight doesn’t guarantee quality. This means it’s important to vet any potential partner thoroughly — your life insurance policy is a valuable piece of personal property and should be treated as such.
CHOOSING A LIFE SETTLEMENT PROVIDER OR BROKER? A QUICK RECAP
While brokers and providers both offer a pathway to life insurance settlements, they take different routes.
Providers work for buyers who purchase life insurance policies as an investment. Brokers work for you, helping you get the best value for your life insurance settlement.
In practice, this means providers want to get deals done quickly. They often provide “instant” offers that get you cash for your policy as soon as possible. Brokers, meanwhile, shop the market for multiple buyers and come back with several offers for you to consider.
But understanding the role of brokers and providers is just the first step. The real decision is choosing a company you can trust.
Why the Broker or Provider You Choose Matters
Choose the right partner, and you get transparency, honesty and experience. Choose the wrong partner, and you may be faced with:
- Brokers who barely shop a policy, leaving you with limited offers
- Providers who give below-market “instant offers”
- Firms that hide fees
- Companies that use aggressive sales tactics
Here’s a quick example. You’re choosing a life settlement broker to help sell a $500,000 insurance policy, and you enlist a new broker in your area because they’re cheaper to hire and seem eager. A week later, they come back with two offers: One for $50,000 and one for $75,000. You take the higher value, but you could be leaving money on the table. This is because, on average, policies should sell for 10%–25% of the death benefit payout. In this case, $75,000 is just 15% of the policy’s face value — a more experienced broker should be able to provide payout options between $100,000 and $125,000.
What happened? Without experience, the broker didn’t have the market knowledge or connections to find great offers. And in an effort to fund their fledgling business, they took the first two offers that came along.
HOW TO CHOOSE THE RIGHT LIFE SETTLEMENT BROKER
Wondering how to sell a life insurance policy safely? Look for companies that offer:
- Substantive buyer network size and quality
- Experience in selling your specific policy type, such as universal life, term conversions or survivorship policies
- Transparency around typical payouts and commission fees
- Fully independent operations, rather than channeling sales to the same few buyers
- Documented ability to navigate HIPAA regulations around medical records and protect your privacy
- Policy valuation projections before formally listing (the ability to price the policy internally)
- Ease of communication backed by simple case management technology
QUESTIONS TO ASK A LIFE SETTLEMENT BROKER
Even if potential partners check all the boxes, it’s worth asking questions. Thesequestions map to the characteristics above, and they help ensure that actions match assertions.
1. How many buyers are in your network?
More buyers are better, since this typically means more market expertise and more opportunities for a solid settlement offer.
2. Do you have experience with my specific policy type?
Different policies have different sales requirements. For example, a joint survivorship policy typically requires the consent of both covered parties to sell. Look for a licensed life settlement broker who understands how different policy types impact payouts.
3. What are your fees, and when will they be charged?
Fees vary by company, so it’s worth asking exactly how much it costs to sell your policy, what type of fees will be assessed and when they are due.
4. How long does your process usually take?
While life settlements don’t follow a strict timeline, experienced brokers shouldbe able to provide a rough estimate. The process usually takes up to 90 days — watch out for companies that can’t provide any estimate or say that sales will happen immediately.
5. How do you protect medical and financial data?
Companies should be able to describe in detail the steps they take to protect your data. This should include standard processes such as encryption, along with access requirements such as two-factor authentication.
6. What is the typical payout improvement you obtain vs. direct offers?
One of the primary reasons clients choose brokers is for better life settlement payouts. Here, it’s worth being direct: Ask your prospective broker how their settlements compare to those of providers looking for quick sales.
7. How often will I receive updates?
Don’t be afraid to advocate for clear and consistent communication. Updatesonce every few days or every week are standard, but make sure you hold companies to their word.
SIGNS A COMPANY IS NOT THE RIGHT FIT
It’s also worth watching out for life settlement red flags. Some of the most common include:
- Requesting fees or payments up front
- Very limited buyer networks
- Refusal to disclose licensing
- Instant offers without underwriting
- Pressure or scare tactics
- Changing fee explanations
- Long gaps between updates
- No secure portals for document provision
HOW TO COMPARE LIFE SETTLEMENT OFFERS AND SERVICE ACROSS MULTIPLE COMPANIES
After asking questions and avoiding red flags, you have several companies on your short list. Here’s how to compare multiple companies and find your best fit.
Step 1: Request written valuations from 2-3 brokers, and sample payout ranges from 1-2 providers
Don’t just ask questions — ask for details in writing. While these life insurance policy valuations and payout ranges aren’t legally binding, they provide a solid reference point.
Step 2: Compare buyer network sizes
Brokers with just one or two buyers in their network often sell exclusively tothese buyers, which means you’re probably not getting the best settlement value. Look for brokers with multiple clients in different sectors — this indicates diversity in buying preferences and helps drive competition.
Step 3: Evaluate process timelines
If one company says they can sell your policy in two weeks and the other says three months, ask why. In some cases, quick sales come with pressure tactics that are designed to compel action for lower-value payouts. The process usually takes about 90 days, though you may be able to move faster if you submit a complete medical file.
Step 4: Consider fees and transparency
Higher fees aren’t necessarily a bad thing — if they are necessary andtransparent. While it’s tempting to choose the lowest-cost provider, reduced fees may come with limited expertise.
Step 5: Investigate communication practices
Take the time to read life settlement broker reviews. What do they say about communication, transparency and value? While companies themselves offer a positive spin, the experiences of other clients tell the tale.
Step 6: Look at the level of client support
Support is also important. Here, data from life settlement provider reviews, alongwith direct conversations with brokers or providers, can pinpoint support levels. Look for availability, accuracy and post-sales service for clients who have questions.
YOU’RE CHOOSING A FINANCIAL PARTNER — NOT JUST A TRANSACTION
Selling your life insurance policy is a single transaction that carries long-termimpacts. Your chosen company will handle sensitive health information, manage large financial outcomes and navigate a multi-step process that can take weeks,all while ensuring transparency.
Put simply, the right company doesn’t just sell your policy — they cultivate a reciprocal relationship that delivers both financial benefits and peace of mind.
Not sure how to choose the right company to sell your life insurance policy? See how Life Settlement Advisors helps find your best fit. Get in touch today.
