Chapter 6: What Are the Advantages of an Investor Working With a Life Settlement Broker?

In the life settlement industry, navigating the secondary market for life insurance policies requires more than capital and interest — it requires access, due diligence, and expert execution. For institutional and high-net-worth investors alike, working with a life settlement broker is essential to maximizing returns, minimizing risks, and streamlining the acquisition process.

This chapter explores how brokers operate, what advantages they offer to investors, and why a trusted intermediary can make the difference between a strong investment and an avoidable risk.

The Broker’s Role in the Life Settlement Market

A life settlement broker acts as a fiduciary intermediary, representing the policyholder (seller) but also playing a crucial role in preparing the transaction for investor participation. While they technically serve the seller’s side, experienced brokers add value to both sides of the deal by:

• Bringing structured, underwritten policies to market
  
• Ensuring legal and compliance documentation is in place
  
• Coordinating with providers, underwriters, and investors
  
• Facilitating transparency and documentation across the transaction
  

In many cases, brokers function as market-makers, aggregating deal flow and pricing intelligence across dozens of providers, funds, and insurers — which ultimately benefits investors seeking curated opportunities.

Access to Quality Policy Flow

Unlike public securities, life settlements are not traded on an exchange. The quality of deal flow is largely dependent on a broker’s network, experience, and sourcing capabilities.

Experienced brokers offer:

• Access to pre-screened, underwritten policies
  
• Relationships with estate planners, financial advisors, and carriers
  
• The ability to curate policy portfolios based on investor targets (e.g., LE range, face value, policy type)
  
  

Stat Insight: According to LISA, brokers facilitate approximately 80% of life settlement transactions in the U.S. — and represent the primary gatekeepers to deal flow for institutional buyers.

Due Diligence and Risk Assessment

Life settlements are complex legal instruments. Reputable brokers perform multi-layered due diligence that reduces risk for investors before the policy is ever offered. This includes:

• Life expectancy underwriting from multiple LE providers
  
• Verification of policy carrier strength (e.g., A-rated or better)
  
• Review of contestability period, premium schedules, and conversion clauses
  
• Confirmation of ownership rights, insurable interest, and disclosures
  

In many ways, brokers serve as the first line of defense against fraud, noncompliance, or illiquid policies that don’t meet investor criteria.

Market Navigation and Negotiation

A key advantage of working with a broker is their ability to leverage market data and pricing benchmarks. Brokers regularly facilitate bidding between multiple investors or funds — driving up value for sellers but also keeping pricing fair and transparent.

For investors, this means:

• Access to current market pricing
  
• Better insight into supply-demand dynamics
  
• The ability to negotiate premiums or contract terms with clarity
  

Brokers can also recommend alternative policy structures (e.g., split death benefits, joint ownerships) based on investor needs.

Fee Structure and Transparency

Brokers are typically compensated via a commission paid by the seller, not the investor. In most regulated states, fees must be disclosed and are capped by law.

Typical structures include:

• Flat fees based on policy face value
  
• Percentage commissions, often 5–7% of the settlement value
  
• Fees disclosed on settlement documentation in regulated markets
  
  

While brokers do not charge investors directly, their involvement reduces legal, underwriting, and sourcing overhead, which can significantly lower the total acquisition cost for investors.

Case Study: The Power of Broker-Facilitated Investment

Scenario: A boutique fund manager was seeking policies with short-term maturities (LE < 5 years) and low annual premiums.

With a broker’s help:

• The investor accessed a pool of 70 underwritten policies in under 90 days
  
• The investor avoided two flagged policies during due diligence that lacked proper insurable interest documentation
  
• The final portfolio yielded a projected IRR of 11.2%, with 89% of policies maturing within 6 years
  
  

Lesson: Without broker involvement, the investor would have lacked both policy volume and underwriting protections — reducing expected yield and increasing legal exposure.

Conclusion: Brokers Drive Access, Assurance, and Advantage

While investors can technically acquire life settlements directly, working with a licensed broker is the most efficient, secure, and scalable path to participating in this market. Brokers serve as gatekeepers of deal quality, facilitators of due diligence, and navigators of regulatory complexity.

In the next chapter, we’ll tackle the most frequently asked questions by investors — from accreditation and tax treatment to liquidity windows and fund structures.