The U.S. life insurance market was worth more than $1.2 trillion in 2024 and is on track to reach $1.5 trillion by 2028.
These numbers make life insurance a valuable investment opportunity for buyers, and a potential windfall for policyholders looking to sell. The caveat? Making sure the life settlement company you’re working with has your best interests at heart. In this piece, we’ll explore the different types of companies that can buy your life insurance policy or help facilitate the transaction and evaluate how they stack up.
SELLING YOUR LIFE INSURANCE POLICY: WHO’S INTERESTED?
To sell a life insurance policy, two parties are necessary. First is the seller (you). Second is a buyer. This buyer may be an investment firm, another insurance company or a life settlement provider representing the buyer’s interests.
You also have the option of working with a life settlement broker. These brokers have the skills and qualifications to understand the life insurance market. Brokers work to ensure that policyholders have all the information they need to make a solid financial decision and get the best value for their policy.
It’s worth noting that because life insurance transactions are regulated, brokers must be licensed in their state to broker any agreements.
BROKER OR BUYER? EXPLORING THE DIFFERENCE
As a seller, the choice is yours. You can work directly with a buyer or their provider representative or leverage a broker’s expertise. But what’s the difference? Why choose one over the other? Here’s a look at both options in more detail.
Buyers
Also called direct buyers or life settlement providers, these companies have a simple goal: Buy low and sell high.
That means they want to purchase your policy for as little as possible and sell it for the biggest profit. Put simply, they have the buyers’ best interest in mind. By leveraging their insurance industry knowledge, buyers may build life settlement offers that seem reasonable but are actually less than fair market value.
As the policy owner, the choice to go direct is yours. For example, if your current insurance provider offers to buy your policy through a cash surrender, your existing relationship with the company may help streamline the transaction and help you access funds faster. Given the complex nature of insurance transactions, using a familiar provider — even if that provider prioritizes their profits — is a viable option for sellers.
Brokers
Brokers represent sellers. It’s their job to calculate the value of your policy based on market conditions and find buyer(s) willing to pay a fair price. Using a life settlement broker gives you access to multiple offers, and brokers can help you evaluate each offer to determine which offer makes the most sense for your current financial circumstances and long-term financial plans. You’ll typically get a higher payout by working with a broker. Let’s look at a recent case where a broker brought significant value to the seller. A male age 80 had a $500,000 universal life policy he no longer needed. He called a direct buyer or provider and received an offer of $5,000 for his policy. Not happy with the offer, the insured contacted Life Settlement Advisors and we were able to get an offer of $75,000. As the broker we took a fee of $15,000, netting the seller $60,000.
QUALITIES TO LOOK FOR IN A LIFE SETTLEMENT COMPANY
Life settlement brokers and providers may be large companies, small businesses or qualified individuals. As a result, it’s worth evaluating your prospective partner before choosing them to sell your policy.
In practice, four qualities are critical:
Certification
As noted above, companies that buy out life insurance policies must be licensed in their state to carry out these types of financial transactions. In addition, make sure that any company you choose is properly bonded and insured, and that they clearly lay out all processes, fees and timelines related to your policy sale. If brokers can’t (or won’t) give you details about standard fees, or if they’re vague about settlement numbers, consider a different broker.
Experience
The insurance market is constantly evolving. While life insurance policies experience less volatility than stocks and other financial instruments, their value is impacted by interest rates, inflation and other financial factors.
A life settlement broker with experience is better equipped to navigate these changes and help you get the most value from your policy. For example, knowledge of market trends might lead a broker to suggest that you wait until conditions improve. If market conditions favor a quick sale, meanwhile, your broker may be able to find and advise you on multiple offers.
Reputation
Given the amount of money involved in life insurance policy sales and the potential impact on your life and finances, it’s important to consider your potential broker’s reputation. Before partnering with any company that will buy your life insurance policy, do some research — find out what other clients are saying about the broker online. Look for information about the value of settlements, how sellers were treated and if they would recommend the broker.
Quick tip: Use multiple sources to evaluate reputation. While reviews directly from the broker’s website are one piece of the puzzle, look for independent data to confirm this information.
Communication
Last but not least? Look for a broker that offers consistent and clear communication. This includes regular updates on policy offers, the progress of sales once contracts are signed and any issues that may arise. Your broker should also ensure that any deal clearly defines in writing how often there will be check-ins about your health and what information the buyer can access.
GET PEACE OF MIND WITH LIFE SETTLEMENT ADVISORS
At Life Settlement Advisors, we have more than 25 years of industry experience educating clients about life settlements. We share information to build confidence and assurance and help each policyholder move forward with the transaction only if they are convinced it’s in their best interests. Licensed, bonded and insured in all the states where we do business, we are more than just a company to buy your life insurance policy. We’re a resource if you are curious about how a life settlement could transform your life.
Did you know you can sell all or a portion of a life insurance policy, even term insurance? Selling an unwanted life insurance policy is no different than selling your car, home or any other valuable asset that will create immediate cash. Contact us today to learn more.
