When it comes time to sell a life insurance policy, understanding your options will be crucial. Most policyholders will begin their journey by speaking to companies that buy policies directly. These sort of companies typically offer a lower amount of money to purchase the policy quickly.
There’s no bidding war or anything like an auction that could drive the offer price up. Companies that buy policies directly offer lower amounts hoping policyholders won’t take the time to pursue higher offers or enter a policy auction.
Many people unsatisfied with their initial offers will pursue a higher asking price by hiring a broker. Most brokers in this space have a private network of buyers that compete to win certain cases. These bidding wars can result in a significantly higher offer for policyholders, especially for those who have or have had significant health impairments like cancer.
Many will be concerned with the broker’s fees and commission. However, after studying the data, and reading case studies, hiring a broker typically results in much higher offers, even after broker fees and commission.
The catch: A broker’s process requires more time.
When working with a broker, there are things you can do to prepare that will shave time off the process. There are important documents to have ready and information that you need to know from the start.
The first thing you’ll need is all the information about your policy to verify that the policy is eligible for a life settlement. Further, a broker will tell you if you have other options besides a settlement that might make more sense for you.
Oftentimes a rider like the accelerated death benefit may be hiding in the fine print. A broker makes no commission should you elect to use a rider such as this. But they should make you aware of it nonetheless.
In Ted Muller’s case, neither his life insurance company nor the companies offering to buy his policy made him aware of his death benefit rider. Windsor’s Cindy Deacon was the only person to point this rider out to him even though it meant she would not receive a commission. This significantly increased the amount of cash he was able to get from his policy.
Permanent policies are either universal or whole life insurance. Both of these policies are set up to be in force for a lifetime as long as the premiums continue to be paid. These are the most popular types of policies sold.
However, if you have term life insurance you may still be eligible. A term policy is only active for a set amount of time unless it’s converted to another type of life insurance policy. It’s important to note the latest date that the policy can be converted. A broker will then walk you through the process to convert the term policy into a permanent policy.
You aren’t able to buy a life insurance policy and then sell it right away. A policy needs to be in force for at least two years before qualifying for a life settlement. Some states require 5 years.
The beneficiaries of a life insurance policy are the people who would receive the death benefit if the insured person passed away. This person changes with the life settlement process.
So, after you sell your policy, the original beneficiaries no longer receive any of the death benefit. The new investor who purchased your policy will receive the death benefit.
The coverage or death benefit of a policy refers to the face amount. This is the amount the beneficiaries receive after the insured person dies.
The face amount needs to be at least 100K in order to be considered for a life settlement.
In addition to your policy information, there’s a lot of information about you specifically that will be collected. This is to determine your ‘life expectancy’(LE). Your LE plays a big role in determining the value of your life insurance policy to an investor.
The person buying your policy will be taking over your monthly premiums. So policies where the owner has a shorter LE are naturally more valuable. This is one reason policyholders with significant health impairments like cancer should hire a broker. The first offer is rarely the best offer.
Gathering medical records can be time-consuming and frustrating. Experienced brokers know exactly what you’ll need and who to contact.
Start with a list of all your healthcare providers’ contact information. Your health status will be determined based on the records that your physicians can provide.
Provide a list of all medications that you take. This will include the dosage and frequency of each medication.
All past surgeries are very relevant to your health history. Provide the date of operation, the reason for having the surgery, as well as the hospital where you had the procedure done.
You’ll want to describe your ability to fulfill daily tasks. You will go through a list of common daily tasks and describe any hardship you have completing them. These are tasks such as:
All of these things help the life settlement broker to properly represent and market your life insurance policy.
Life settlements are becoming a popular financial solution for many people in retirement. Though the life settlement process can still seem overwhelming for some.
Having someone invested in your corner to help gather the information makes the process much easier for you. A broker has experience in marketing policies. They know exactly what to look for and have ready so that you can get the highest payout possible for your policy.
Life settlement brokers consistently get their clients higher offers compared to the payout with a direct buyer. Read more about what a broker does to determine if using a broker to sell your life insurance policy is right for you.
If you’re considering a life settlement, start with a life settlement calculator. This will give you an idea of how much your policy is worth and if your policy is qualified for a life settlement. From there you can reach out for a free consultation to discuss your specific situation and whether or not a life settlement is right for you.
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