If you’re thinking about selling all or part of an unneeded life insurance policy, there are plenty of life settlement companies ready to work with you. But the decision to opt for a life settlement should not be taken lightly, since it can have a profound impact on your financial well-being—as well as the financial well-being of your beneficiaries.
Before you simply type “life settlement broker near me” into a search engine and hope for the best, it’s worth taking a few minutes to read this blog. We’ll answer some important questions about life settlement companies and brokers—including the difference between the two, and how much it might cost to work with a life settlement broker.
What Is a Life Insurance Settlement Broker?
A life insurance settlement broker is a professional who works with individuals as they explore their options for unneeded or unwanted insurance policies. If you work with a broker, you can expect them to take a consultative approach as they help you work through the life settlement process, from evaluating your needs to finding the best company to sell your life insurance policy to. This is an important service, since comparing different insurance carriers and different offers from settlement providers—and understanding their terms can be difficult for non-experts to wrap their heads around fully.
What Is the Difference Between a Life Settlement Provider and a Life Settlement Broker?
As described above, a life settlement broker works directly with a policyholder, helping them to explore their life settlement options and identify the best opportunity to recoup maximum value from an unwanted or unneeded policy. A life settlement provider, by contrast, is the investor or company that ultimately takes over the policy (and its eventual death benefit) and provides the policyholder with their actual settlement (or “payout”).
Who Does a Life Settlement Broker Represent?
While they work with life settlement providers, a life settlement broker primarily represents the policyholder seeking the settlement. Their job is to serve as the go-between, helping clients understand their different options and choose the best for their unique situation. This means the policyholder doesn’t have to go toe-to-toe with big insurance companies, which can quickly become overwhelming.
When you pursue a life settlement, your broker typically represents your interests by…
- Discussing your reasons for pursuing a settlement, to ensure that you have thought through the advantages and potential disadvantages.
- Letting you know what to expect throughout the process—including key milestones and decisions that must be made.
- Working with various life settlement providers to evaluate their offers and help you understand your best option(s).
- Negotiating with providers to recoup the most valuable possible value from an unwanted or unneeded policy.
- Guiding you throughout the life settlement process, culminating with the settlement payout itself.
What Is the Average Life Settlement Commission?
When you work with a licensed life settlement broker, you can expect to pay a commission—though the structure and amount of these commissions may vary from one broker to the next. This commission is meant to compensate the broker for all their efforts to collaborate with insurance companies and settlement providers to find the best possible option(s) to pursue.
The U.S. Financial Industry Regulatory Authority (FINRA) notes that transaction costs (including commissions) associated with life settlements can be “as high as 30%,” a figure often cited as an industry standard of sorts.
Unfortunately, it’s not always easy to compare commission amounts. Consider these statistics:
- One broker (speaking with Forbes) reported an average life settlement commission of “22% of the amount of a life settlement payment.”
- The same source also notes the specific guidelines in place for determining their fees: “no more than 8% of the face amount of a policy or 30% of the life settlement payment, whichever is lower.”
- Finally, the article also notes that it’s not unheard of for commissions to be as much as “50% of the price a policy sells for.”
Life Settlement Advisors: Ready to Take On Your Case
If you’re considering selling your life insurance policy, you deserve a trustworthy ally that’s knowledgeable and ready to advocate for your best interests. Most people only engage with the life settlement process once in their lives—if that. Our team has been in the industry for decades, keeping up with the latest information and best practices to protect your interests and help you find the fairest settlement possible.
Take the first step today by finding out if you qualify for a life settlement and using our free life settlement calculator to get an idea of what you can expect. You can also learn more about the life settlement process or submit your case to get the ball rolling.
