Each year, more than $100 billion in face value of life insurance lapses due to seniors over the age of 65 not knowing that there are better options out there that allow them to sell unneeded or no longer affordable policies – namely, the life settlement route.
Life settlements are a growing secondary market, with more and more seniors choosing to sell the life insurance policies that they don’t need anymore. If you are interested in selling your life insurance policy, you should keep in mind the following four pitfalls, and avoid them, when working with a financial advisor or broker to sell your policy.
It can be tempting for financial advisors and brokers to promise more than they can deliver on a life settlement transaction. After all, they stand to make money either way. Unfortunately, some advisors do the opposite of what should be done – they over-promise and under-deliver. This can lead to disappointment when offers are not as high as sellers were led to believe. Even worse, if your financial advisor is giving you skewed information about your life settlement, they may be giving you inaccurate information about other things. Always insist that your advisor or broker tells you the straight truth and ask them to show you any calculations or data that would support their prediction. Otherwise you might spend a lot of time and come out with little or nothing to show for it.
You might be ignoring premium payments due to whatever reason, but if your financial advisor isn’t drawing attention to it, watch out! Most insurance companies won’t engage in the first steps of verifying coverage, not to mention processing a change in ownership, if you’re behind on your premium payments.
It’s your responsibility to keep your premium payments on your life insurance policy current, right up until the policy ownership has officially and legally been transferred to the new owner. So keep your premiums paid up, and if your financial advisor tells you not to worry about them – run, don’t walk, away from their office. That attitude can end up costing you dearly.
Choosing to Work with the Right Life Settlement Company
This is a big one. Life settlement brokers are crucial in selling a life settlement. They have the connections, the experience, and the know-how. You and your financial advisor don’t. That doesn’t mean you should choose just any broker to work with throughout the life settlement process. Some brokers are more ethical than others, some take higher commissions than others. Some brokers are simply better-connected and more capable than others.
When searching for a reliable broker, make sure to ask questions about their experience. Are they members of LISA, the national Life Insurance Settlement Association? Which states are they registered in? Have their licenses ever been revoked or suspended? Are they fully licensed, or are they working under borrowed licenses? The answers to these questions can tell you a lot about the broker and can separate the wheat from the chaff.
Light on the Details, Vague with Answers
If your financial advisor and life settlement broker aren’t offering you comprehensive answers to your questions, watch out. If they’re not offering you in-depth information about the life settlement process, or asking you detailed questions, they’re wasting your time and are probably going to be unable to get you a good deal. If they keep putting off things that seem important to you, saying that it can be taken care of later, don’t accept that.
Financial advisors and life settlement brokers are supposed to be helping you get the best life settlement deal possible. It’s a serious matter, because serious amounts of money are involved. The problem with some financial advisors and brokers, however, is that since they are going to get paid anyway, either through up-front fees or commissions taken from the money the buyer pays for your life insurance, they don’t have much of an incentive to go the extra mile for you. This can express itself through, simply put, laziness – not wanting to get into the finer points of your life settlement and the various ways forward. Make sure to press your advisor or broker for all the information you feel you need.
As with any large financial engagement, you should give your life settlement process the attention and treat it with the seriousness it deserves. Be wary of advisors or brokers who promise you the moon – if it sounds too good to be true, it probably is. Wait until you see offers in writing and scrutinize those offers carefully. Don’t ignore your obligations towards a policy just because you’ve decided to sell it – keep your premium payments current. Choose the broker you work with carefully – their expertise and attitude will determine whether you get a good deal, a bad one, or neither. Finally, pay attention – as always – to the fine print and the details of every engagement within the whole life settlement process – from the license of your broker, the commission they take, to the contractual details of any offer. Get everything in writing. This will ensure that you go through the process with as much information and safety as possible. Good luck!