If you decide to use the services of a life settlement broker rather than going directly to a life settlement provider, you need to find one that can help get you the most money from your policy.
What does a life settlement broker do?
You might say that a life settlement broker works in the opposite way of an independent insurance agent. While an independent agent helps you buy a life insurance policy, a life settlement broker helps you sell a life insurance policy. Both work to get the best deal for their client. Unlike an independent agent, who presents your application for insurance to multiple insurance companies, a life settlement broker presents your existing life insurance policy to multiple life settlement providers in the secondary market for insurance.
Is your broker licensed?
While the National Association of Insurance Commissioners (NAIC) was instrumental in developing the model for the regulation of life settlements, individual states control the licensing of life settlement brokers who do business in those states. Proper licensing and oversight helps assure a transaction follows proper procedures and complies with HIPPA and other medical privacy laws.
Many states are just now starting to pay close attention to the life settlement industry. Some of those states have a very easy application to obtain a life settlement broker’s license. Others, like Florida, Texas and Ohio, have very stringent licensing requirements. As a consumer, you have the right to ask to see a broker’s credentials. If a broker is unwilling or unable to show you that he or she is licensed in your state, that is a good reason to look for another broker.
Will your broker be transparent throughout the transaction?
A good life settlement broker will take plenty of time to educate you about the process of selling your policy in the secondary market for insurance. If you are confused or have unanswered questions, you should always be able to call your broker and get answers. Your broker should let you know the names of all of the interested buyers and also be willing to show you all written offers.
Watch out for a serious conflict of interest?
Just like many credit card issuers also own credit collection agencies, it is not unusual for a life settlement broker to have a close association with a specific life settlement provider. If your broker works in a separate office or division owned by the same company that owns the life settlement provider, that is a definite conflict of interest and may influence the amount of competitive offers you receive.
How is the fee calculated?
Your broker is paid on commission, but how the commission is calculated can vary. The most common life settlement fees include:
- Payment based on a percentage of the face value of the policy
- Payment based on a percentage of the settlement brokered
- Payment based on the value created (amount over the surrender value of the policy)
Your contractual agreement should clearly spell out the percentage of your broker’s commission as well as the basis for calculating the commission. Each method used to calculate your broker’s fee can ultimately make a difference in how much money you actually receive.