If you want to sell your life insurance policy, you can start by familiarizing yourself with life settlement transactions and associated regulations. Check with your state’s insurance authority for more information about the process, licensing requirements and potential scams.
Next, decide whether to use a broker. This choice involves a tradeoff between cost and convenience: A licensed life settlement broker can answer your questions, look out for your interests, pull quotes and handle negotiations — but a broker will charge for the service. Alternatively, you can choose to shop and compare on your own to avoid broker fees.
Regardless of whether you hire a professional, the process will require the same basic steps:
- Application: You’ll complete an application for each life insurance settlement from which you solicit offers. As part of the application process, you must grant the settlement company permission to obtain information about your policy and health. You may also be given disclosures and asked to provide additional information or documentation.
- Documentation: Once you have submitted your application and granted the necessary permissions, the settlement company underwriters will begin gathering information. They will contact your life insurance provider to request details about your policy, including its death benefit and premiums. The underwriters will also request a copy of your medical records from your healthcare providers.
- Appraisal: After reviewing the relevant information, underwriters will determine the market value of your life insurance policy. The underwriters will consider whether your policy is a good investment based on its value and the opinion of medical experts regarding your health. They will also look for signs of fraud.
- Offer: Assuming your policy is deemed suitable for purchase, the settlement company will extend an offer. You can either accept or decline the offer. We recommend comparing offers from multiple companies before making a final decision. If you hired a broker, you may be more able to negotiate.
- Closing: If you accept the offer, the settlement provider will send a closing package for you to review and sign. Once you return the signed documents, your insurance provider will be notified of the transaction. Ownership of the policy will change, and you will receive the settlement funds.
From start to finish, you can expect this process to take between 60 and 120 days. The exact timing will depend on how quickly third parties — including your insurance company and health care providers — respond to requests for information.
Note that selling a life insurance policy requires the cooperation of the policy owner and the insured person. In most cases, the same person fills both roles — but not always. The policy owner grants access to policy information, while the insured person grants access to medical records.
