When there is a need for instant cash, one of the assets you can sell is your life insurance policy in exchange for a life settlement. When a policyholder sells their life insurance policy to a buyer, the buyer takes care of the premiums until he gets the death benefit. When we talk about the transactional process for getting a life settlement, there are two kinds of parties involved- life settlement providers and brokers; out of which, a seller can choose to work with one.
Most laymen get quite confused as to whether they should choose a life settlement broker or a licensed life settlement provider when selling their life insurance policy. This is a valid confusion since the life settlement industry has not yet evolved and grown to a degree where people can readily reach all the information pertaining to it. To make it clearer, here’s how life settlement providers and brokers work and who is better when you sell your life insurance.
LIFE SETTLEMENT BROKERS
Life settlement brokers act as mediators between the policyholder and the buyer. When a seller chooses to work with a broker, the broker represents the seller and takes care of the offers. Brokers mostly work independently, and when we talk about the current scenario, there aren’t any evident dominant brokers in the market.
Many people choose to work with brokers because it gives them access to all the information pertaining to the transaction. Under certain conditions, working with a broker may be a good idea. However, there are certain challenges that one would face when trying to choose a broker for transacting. Here’s a list of issues with a broker that you might face.
One of the biggest issues of seeking professional help from brokers is that they charge a commission. In addition, ever since more people have been turning up to brokers, there has been an unreasonable hike in the fees for these brokers. To monitor how much brokers charge, states have started regulating the commission for brokers.
However, the truth is, if you choose to work with a broker when you sell your life insurance, you mostly have to pay a certain amount of money as commission. For most states, 30% is the standard commission that a broker can charge you, which is still a big chunk of what you get in exchange for your life insurance policy. This makes people look for an alternative.
Yet another issue when you sell your life insurance through a broker is that you can’t really be sure if a broker prioritizes to get you the best offer. In order to get the right value for your policy, you need your broker to work objectively. However, in reality, there have been so many instances where a broker would be trying to benefit himself more than the client.
If you find your broker pushing you to settle down for the first offer, you know your broker is trying to get done with one client and jump to another, bagging some fee. You wouldn’t want that to happen to you since you don’t get a chance to explore the other beneficial offers.
When we talk about any transaction that involves money and confidential information, you wouldn’t want to work with an organization or agent that may hold your info and money at risk. This is why it’s important to check your broker’s license and run a background check. While it sounds as simple as that, it can be a tricky job since brokers work independently. This can make fishing information about them hard.
LIFE SETTLEMENT PROVIDERS
Life settlement providers are companies that are licensed to buy a life insurance policy from a policyholder in exchange for money. The best thing about life settlement providers is that you can find out if they are licensed to transact or not easily. Also, running a background check is relatively easier in case of life settlement providers. Furthermore, life settlement providers don’t require you to pay a commission.
You can walk into a licensed company, see what they have to offer, and walk out when you want to before transacting. This gives you the ability to check for prices from different providers and settle down for what looks like the best offer for you.
Since it’s a lot more convenient to work with a life settlement provider, most people recommend providers instead of brokers. Concerns like licensing, confidentiality, commission, etc., are making life settlement providers a more obvious choice.