Life settlements are relatively new, so it is important to find a broker who understands the market, has enough drive to negotiate the best deal on your behalf and compassionate enough to guide you through what might be an emotional process.
A life settlement is a sum paid for a life insurance policy no longer necessary or desired. The value of the settlement is negotiated, and most settlements are up to three times the value of simply surrendering the policy. The right broker will be able to answer your questions and be knowledgeable and skilled enough to get the most for your policy.
Consider the following when finding the broker to meet your needs.
The Information Provided - The broker should be educating you and keeping you up to date on all aspects of the settlement. He should be upfront about his own affiliations and actions. There is nothing for a broker to hide in a settlement, so he should be open and always willing to explain or answer questions.
The Fee Structure - Brokers are paid in one of three ways. They may take a percentage of the insurance's face value. This means they get the same amount regardless of the settled price. They might get a percentage of the negotiated price. This encourages the broker to get the highest price possible, but can also significantly eat into your benefits.
A final, and perhaps fairest, method of payment is for the broker to take a percentage of the value gained. The settled amount less the surrender value is the benefit gained by the broker. He then takes a percentage of that amount. This encourages him to get the largest settlement possible to increase his own earnings while protecting your own.
Industry Contacts - The contacts of your broker should be large-scale institutions and competitive bidders. There is still a great deal of fraud in the insurance industry, so your broker should be working with those who already know how to identify and avoid fraudulent activity. Your broker should also know some of the highest bidders in the industry to be sure you are getting the most value for your policy.
Medical Contacts - A medical professional on the staff or associated with a broker's firm can also work to your advantage. A doctor working with your broker can help interpret your medical history in an advantageous way. This can mean a difference financially.
Protecting Your Interests- The National Association of Insurance Commissioners (NAIC) helps regulate the insurance industry by setting standards of conduct on the part of brokers and insurance professionals. You should also ask to see the broker's E&O insurance (Errors and Omission insurance). This insurance is unavailable to brokers who have a history of fraud or unethical behavior. Brokers without E&O insurance should be avoided.
A life insurance settlement also means disclosing your personal and medical information to your broker. Be sure to read and understand the broker's privacy policy to best protect your interests.
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