Selling a life insurance policy you no longer need can return significantly more than surrendering it to your insurer, but only if it reaches the right buyers. Life settlement providers and institutional investors are the companies that buy policies on the secondary market, both of which may be willing to raise their offers if they know another seller is interested. That’s why selling your life insurance policy to the first company that makes an offer can cost you thousands of dollars in value you never knew the policy had.
What Companies Buy Life Insurance Policies?
Life settlement providers and institutional investors buy life insurance policies on the secondary market, while brokers represent sellers and bring policies to those buyers. The one you approach first impacts your payout, since a provider makes a single offer on its own behalf, while a broker brings your policy to several buyers who have to compete for it.
Life Settlement Providers
Life settlement providers are the direct buyers in this market. They purchase policies from policyholders with their own capital, then either hold those policies in their portfolio or resell them to institutional investors. Every dollar a provider saves on the purchase price becomes profit, which gives it every reason to open with a low offer.
Institutional Investors
Institutional investors are organizations like hedge funds, pension funds, and insurance-dedicated funds that invest large pools of money on behalf of their clients. They acquire life insurance policies through providers or brokers and hold them as alternative assets until the death benefit pays out.
A policy pays out based on the insured’s lifespan rather than market performance, which gives these investors returns that don’t change based on their stock holdings. Many of these funds buy policies in large numbers, which is why a broker can put your policy in front of many at once.
Life Settlement Broker
A life settlement broker never buys your policy. Instead, they work for you, taking your policy to multiple institutional buyers at the same time, so they must compete for it. That competition often gets sellers higher bids than the ones they would get from a single buyer.
Life Settlement Advisors works this way on every policy, representing sellers only and never the buyers bidding for them. Send us your case to see what your policy could bring.
Direct Buyers vs. Life Settlement Brokers
If you go straight to a direct buyer, you’ll accept a number from a company whose profit depends on paying you as little as possible. A provider makes money on the spread between what they pay you and what the death benefit eventually returns to them. Nothing about that agreement is dishonest, but nothing about it works in your favor either.
A life settlement broker introduces competitive bidding to tilt the system in your favor. They send your policy to multiple institutional buyers at once, each one submitting an offer without knowing what the others will bid. Buyers who want the policy have to price it accordingly, and that pressure pushes the final number up.
A life settlement offer competition is impossible to replicate on your own. You could approach providers one at a time, but each would know they’re your only active option at that moment. The biggest difference between a life settlement broker and a provider is their obligation, since a broker must pursue the strongest offer available for you while a provider wants to maximize their profit.
What Buyers Look for in a Policy
A broker can only create competition for a policy that buyers want to own. Once your policy meets the life settlement eligibility requirements, these five criteria determine how many offers you attract and how strong they are:
- Age and life expectancy: A shorter life expectancy raises the policy’s value because the buyer holds it for less time and covers fewer years of premiums before the death benefit pays out.
- Policy face value: Most buyers set a minimum policy face value of $100,000, though larger policies draw more bidders and more competitive offers.
- Policy type: Whole life, universal life, and variable universal life are the most commonly purchased. Convertible term policies may qualify if the conversion window is still open.
- Premium cost: Low premiums relative to the death benefit make a policy more attractive, since the buyer takes on those premium obligations for as long as they hold it.
- Health status: Independent underwriters review your medical history during underwriting to produce the life expectancy estimate buyers price against.
If your policy lines up well with these criteria, find out if you qualify before you approach any buyer.
How to Choose Who You Sell Your Policy To
Before you hand over any policy information, put whoever you’re considering through these four checks:
- Verify their state license: Any broker or provider you work with should have an active license in your state. Search their name in your state’s insurance department public database to confirm their license is active before you share any information.
- Confirm they owe you a fiduciary duty: A licensed broker carries a fiduciary obligation to act in your best interest. A provider does not.
- Ask how many buyers will see your policy: A broker with relationships throughout the institutional market can put your policy in front of dozens of buyers. One with two or three relationships cannot create the same level of competition for your policy.
- Ask how they’re paid and when: Brokers earn a commission only when the transaction closes, which ties their outcome directly to yours. That pressure on buyers is how a broker gets you more for your policy than you’d receive by approaching a single buyer yourself.
Sell Your Life Insurance Policy for Cash With Life Settlement Advisors
Life Settlement Advisors has spent more than 26 years working on the seller’s side of the life settlement market. We never buy policies ourselves, so our only interest in your sale price is making it as high as possible. Every policy we take on goes to multiple buyers at the same time to push that number up.
Our clients hear from us weekly throughout the process, which usually takes around 90 days from submission to payout. We don’t collect anything until your transaction closes, so you don’t have to pay any upfront fees.
If you’re ready to sell your life insurance policy for cash, find out how much your policy could be worth with no obligation. Send us your case to get started.
