If you aren’t familiar with all of the terminology associated with life settlements, it’s understandable. Selling your life insurance policy for cash, after all, is a unique financial transaction — typically a one-time occurrence, and thus a process you have not previously encountered.
“Life settlement provider” is one of the trickier terms, because multiple parties might be providing services of one sort or another during the life settlement process: your insurance agent, a financial advisor, a broker, and/or the buyer of your policy.
So, what is a life settlement provider, specifically? The provider is the purchaser — the individual or investment group that will become the owner of your policy.
Life Settlement Providers: the Basics
A life settlement provider is the party that will pay you a lump sum of cash that is greater than your policy’s cash surrender value to take over ownership of the policy. The provider will consider many factors in determining how much to offer or bid for your existing policy. Key considerations include:
- The amount of the policy’s death benefit
- The premium payments
- The insured’s age and medical condition
- The type of policy (whole, convertible term, etc.)
The new owner of your policy also becomes responsible for premium payments. Life settlement providers are willing to make these transactions as investment opportunities. They typically are backed by institutional investors and fund many transactions each year. The return on their investment is realized when the insured dies. In the meanwhile, they typically hold sellers’ policies in a confidential asset portfolio.
Life settlement providers invest in all types of policies.
It’s important to note that life settlement providers are regulated in almost all states. They must be licensed to buy policies in the state where the policy owner resides. A life settlement provider typically will also have a compliance department to carefully review each life settlement transaction.
What Is a Life Settlement Broker?
Understanding the differences between a life settlement provider and a life settlement broker will also help you better understand the provider’s role.
A broker, such as IMS Settlements, works on behalf of the policy owner and/or the policy owner’s financial advisor. IMS Settlements will help you understand, “What is a life settlement contract?” Most importantly, IMS Settlements will shop the existing policy among multiple life settlement providers, get the most competitive offers, and negotiate terms. Just like a real estate agent, an experienced broker is familiar with the market and is able to evaluate the worth of the policy.
How IMS Settlements Can Help
Top life settlement providers work with life settlement brokers because the providers are looking for large volumes of investment opportunities. IMS Settlements, with more than 50 years of combined life insurance industry experience, has relationships across the country with institutional funding sources that bid competitively on our cases. For more information, contact IMS today. We also offer free evaluations.