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Life settlements basics

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As boomers head into retirement, insurance agents are increasingly interested in the thriving life settlement industry. If you think you have a settlement opportunity, follow these basic rules to help you lock in the best deal for you and your client.

Rule #1: Work With a Specialized Broker
Unlike direct providers, specialized brokers are interested in getting your clients the best purchase price for their policies and are positioned to complete the transaction expeditiously. They have actionable knowledge of all of the processes required to submit a case, and they will complete the fiduciary responsibility to achieve the highest price and be able to provide that information to the policy owner.

Rule #2: Research Your Broker
When choosing a broker, make sure that he or she is a member of a reputable association, such as LISA, which vets its members to ensure they have the necessary compliance and professionalism. Request references and do some background checking to confirm that your broker has not experienced any prior litigation or license infractions. Finally, make sure that he or she is licensed to transact life settlement business in the policy owner’s state.

During the selection process, remember that presenting your case to several brokers is unlikely to result in a better offer, and can actually result in a lower bid or no bid. Dealing with a single broker will help you avoid impinging upon existing relationships, creating questions about the “Broker of Record,” and generating an overall negative impression of the case.

Rule #3: Understand the Timeframe
Even the most seamless life settlement case can take four or five months to complete. Allow up to 12 weeks to procure medical records and life expectancies and up to three weeks for providers to make final offers. The policy owner will need time to make a decision after an offer is made, and the carrier has 30 days to make changes after the package has been sent to escrow. Once they have received the change forms, escrow agents have three days to pay the client. Contracts are typically written with a 15 business-day rescission period, and agents should not expect to be paid until at least three weeks after the client is paid.

Properly managing expectations is essential to completing a successful settlement transaction. In addition to a realistic timetable, make certain that your broker is not only willing to disclose the amount being paid by the provider, but that he or she will provide proof of multiple bids at the end of the process in order to confirm that the policy was properly shopped. Familiarize yourself with the process and communicate frequently with your client and broker.

Robert Finfer is President and CEO of Integrity Capital Partners, a secondary life insurance leader and one of the largest insurance companies in the Washington Metropolitan area. Robert is a “Top of The Table” Producer and member of LISA, NAIFA and MDRT, and can be contacted at [email protected].


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