As a secondary market best practice – Know who you are dealing with and whom they represent. Here is a quick overview of who does what in the Secondary Market Process:
Insured/Policy Owner – First, of course, is the person or entity that has a policy that they want to sell. They have all the rights by law granted to them as the policy holder. For example, they have the right to sell their policy to another entity who would then become the owner and pay all future premiums.
Financial Advisors/Producers – These are the advisors to the policy owner, such as their insurance agent, accountant or an attorney who might, on behalf of the insured/owner, contact a life settlement broker.
Settlement Broker– This is the secondary market partner who helps the client’s advisor find the best secondary market value for the client. These firms are required to be licensed in 90%+ of states, advocate for the seller and advisor, and have in-depth knowledge of the current purchase parameters and which institutional funds are bidding most actively. A life settlement broker represents you and your client, and creates competition to drive the best offer for the client. Brokers are not the buyers of the policy.
Provider – A nationally licensed company whose primary business activity involves purchasing life insurance policies for its own portfolio or an institutional fund. They have a fiduciary duty to obtain the highest possible IRR for their investors, not insured, policy owners, or the client’s advisors.
Investor – An entity that provides the capital to a life settlement provider for the purpose of purchasing life insurance policies as an institutional investment.
Life Expectancy Underwriter – A company that reviews personal and medical information for the purpose of issuing life expectancy estimates for use in life settlement transactions. They must abide by all applicable privacy and HIPAA requirements.
In addition, here are a few tips to remember if you are considering selling your policy: First, don't sell your policy if you need life insurance. A replacement policy could be impossible to get or be too expensive for you to afford. Second, if you sell your policy, it’s important to remember that the family will not receive a payout when you pass, unless you split the death benefit with the new buyer. Lastly, no different than selling your home, it’s important to obtain multiple bids from a trusted life settlement broker. This should be a transparent process and you need an experienced life settlement broker on your side that can explain the process and minimize potential areas of confusion.
We hope this quick overview helps. Knowing all the parties involved can help clarify the process, and hopefully, help make the transition as stress-free as possible. get a secondary opinion® of the potential value of your client’s policy at https://ashargroup.com/quiz/
