As the population steadily ages, the number of people seeking life settlements will undoubtedly continue to increase. But as with any important financial transaction, one should always tread carefully. That’s why anyone who plans to use this financial service should be sure to find a trustworthy life settlement broker.
Life settlements are relatively new financial tools, and many people do not know much about them. Basically, they entail selling life insurance policies to life settlement providers. Typically a policy will be sold for an amount greater than the surrender value of the policy, but less than the actual face value. These sales can be of great advantage to seniors who no longer need a policy, can’t afford their premiums or face an immediate financial need.
Brokers in these transactions collect competitive bids for the settlement from providers, who are typically financial institutions or investment companies. An experienced broker will know which providers are likely to be interested in their client’s specific policy. He or she will also know how to present the policy in the most attractive way to potential providers. It is unlikely that an individual policy owner or financial advisor would be able to solicit as attractive an offer as an experienced broker.
Brokers are paid for their services on a commission basis. The commissions can be structured in very different ways. Sometimes the commission based on the face value of the policy. This usually means a lower commission percentage, though the base for that percentage is much higher. Furthermore, such an arrangement means the commission will be they same regardless of the settlement amount, so there is little or no incentive to find competitive bids. Sometime, the commission is calculated on the basis of the settle value. While this provides more incentive to find better settlements, but it fails to take into account any equity cash that has been built up in the policy, so it is probably best suited for policy owners little or equity remaining their policy. In other cases, the commission is based on the difference between the settlement amount and the cash value of the policy. The commission percentage may be relatively high under such an arrangement, but the basis for the percentage is typically smaller.
Many states have developed or are in the process of developing licensing regulations for brokers. Meanwhile, the National Association of Insurance Commissioners maintains standards of practice for all professionals involved in such transactions. These standards are not legally binding, but reputable brokers should adhere to them explicitly.
Many seniors are liable to find life settlements to be potentially useful and beneficial options. But like all major financial transactions, they present some risks. To reduce those risks, and to increase the likelihood of a beneficial settlement, it is important to utilize the services of a qualified, reputable life settlement broker.
Want to find out more about life settlements, then visit Jeff Foster’s site on how to find the best life settlement brokers for your needs.
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