If you want to help clients sell unwanted life insurance policies, you may want to learn something about life settlement agents and brokers legal responsibilities.
A life settlement is a relatively simple transaction involving the sale of a property right, of a life insurance policy, through 3 primary parties.
The parties are the current owner of the policy, a third-party agent or broker, and the life settlement provider that purchases the policy.
The agent or broker acts as a fiduciary of the owner and negotiates with providers to get the best possible offer for the owners policy. The purchase price is almost always less than the face value of the policy but more than the cash surrender value.
Because an insurance policy is a capital asset owned by an individual, trust or other entity, one might compare the structure of a life settlement transaction to the process of selling other high-value assets, such as houses.
Like a homeowner selling a house, a policy seller needs help from a knowledgeable professional who is paid to act in the best interests of the seller and understands the complexities involved with the disposition of the property.
From the standpoint of the original policy owner, completing a life settlement transaction is similar to surrendering the policy.
Once the deal is completed, the original policy owner receives a large sum of cash and can stop making premium payments.
The new owner of the policy, the life settlement provider, starts paying the premiums and, eventually, collects the policy death benefits.
Of course, completing a life settlement is different from surrendering a policy. One difference is that the policy remains in force. The provider must support the policy. The second difference is that, in most cases, the original policy owner gets a much higher price than the owner would have received if the owner had surrendered the policy to the insurer.
An agent or broker usually starts the life settlement process by seeking competitive bids from providers.