Most consumers often ask the question, What is a Life Settlement when talking with their broker? Before fully understanding the work of a life settlement broker, a preliminary appreciation of a life settlement itself is necessary. In basic terms, a life settlement involves the sale of a current or existing life insurance policy. The sale is made to a third party. The sales price is a dollar amount set above the current cash surrender value of the policy but below the net death benefit associated with the policy.
The United States Senate Special Committee on Aging reported that the yield to a policyholder was about eight times the cash surrender value through a settlement agreement. Settlement agreements have come to be considered wealth management tools for high net worth individuals who no longer require life insurance, resulting in a higher demand for life settlement brokers.
There are different reasons why a person might elect to sell a life insurance policy. The policyholder might come to the conclusion that the coverage is no longer necessary, or they may desire a different type of life insurance. In a good many cases, a policyholder seeks the assistance of a life insurance broker because premiums have become unaffordable.
In basic terms, this type of broker is one who solicits or negotiates the sale of a life insurance policy via a settlement agreement. Most states require a broker of this type to be duly licensed, typically through the insurance department or commission.
The compensation structure associated with the sale of a policy and the assistance of a broker vary significantly for each individual case. Therefore, anyone interested in engaging the services of a broker needs to discuss and be clear about the terms and conditions of the agreement with the professional they choose to work with.
Let a broker help you work out all the details of your life settlement. Because the broker will represent your best interests, you can count on them to negotiate the best offer for your policy.