Consider Your Life Insurance Settlement Options

A life insurance settlement generally occurs when the owner of the policy feels she or he no longer needs it or cannot afford it, but still wants to make some money from the years of paying into it. The alternative is to accept the designated cash settlement value from the insurance company itself, unless the policy is less than three years old, in which case it has not settlement value. A life insurance settlement is sold to a third party for more than the price the owner would get from the issuing company.

One life insurance settlement option is to sell the policy directly to a life settlement provider. Another option is to turn to a life insurance settlement broker. Both of these play key roles in facilitating life insurance settlements, though they vary greatly in what they do and how they do it. Providers, for example, must have a license to operate in the state in which the owner resides, and nearly every U.S. state has its own regulations on the process.

Life settlement providers actually buy the policy from the owner, and pay cash that exceeds its cash surrender value. The policy then becomes part of the provider’s asset portfolio. These companies typically make multiple purchases on a continual basis, have funds in reserve for these transactions, and have compliance departments to make sure that all is as it should be with regard to state and federal regulations. Policy owners generally have little familiarity or contact with these providers, however. That is when brokers come in handy.

A life insurance settlement broker, in contrast to the provider, aids the policy owner in finding a buyer for the life insurance. For a fee, the broker acts as the intermediary between buyer and seller, and uses his or her experience and industry connections to shop the policy to various providers. A reputable broker will know the providers and their reputation. He will know how to get the best price for the seller, and to do so in a timely and obstacle-free way.

A life insurance settlement is probably best facilitated through a broker, though the policy owner ultimately decides on the new buyer. What he or she must weigh in the various buy offers are the ease and regulation compliance of each buyer’s proposed transaction and the price and the likelihood that each has and will provide the funds in a timely manner. The seller must also consider how seriously each will take the need to retain the seller’s privacy, and the commissions involved, which effect the final yield to the seller.