If you’re planning to cash out life insurance, then you might be wondering on the best way to find a life settlement company for a hassle-free process; our article on the same will help you choose accordingly.
1. Make sure that the company is a member of the life insurance settlement association, popularly known as LISA. The association ensures to teach as well as train the members to provide consumers, like you, the possible clarity on cashing out the life insurance. Therefore, such people would be more qualified in assisting you. Also, due to the presence of rigorous tests to be accepted by the association, it can be understood that such people can deal with the transaction more efficiently. In addition, make sure to check whether the company has voting membership or associate membership; this will help you understand their level of powers, benefits and other related factors. More importantly, make sure to note whether their position has improved over the years or not; this helps you understand the overall status of the company.
2. Make sure to know the applicability of their license, i.e., analyze whether they are fully licensed or using a borrowed license as this can tentatively affect the overall transaction of your deal. This means that if your dealer company is fully licensed, then they tend to have vast powers with respect to dealing policies as compared to the ones holding borrowed licenses. Also, check whether their license had been revoked earlier or suspended; if so, investigate the details. In doing so, you can understand whether there is any past or existing fraud/criminal records before choosing them as your agent.
3. Make a list of companies you think would fit your expectations and compare their number of experienced years in the field in addition to the number of years in LISA. On checking the former, investigate the number of cases and the nature of these cases against the company; to be on the safer side, check the number of cases solved too. You can rightfully ask for a copy of their state-approved anti-fraud plan to understand their internal functioning as well. Also, make a small statistic of whether the number of cases is increasing or decreasing; this will help you understand whether your selling journey would be hassle-free or not. Specifically, you can ask for the number of legal issues or litigation issues on their team to get a clearer picture of the existing environment.
4. Make sure to check the fiduciary responsibility of the company, which means to analyze whether there is any trusted relationship between the company and other individuals or companies; this tends to affect the overall transaction or the expectations of the policy in your hand, as the company has to oblige with the pre-existing relationship legally. This is because on breaching such a relationship, the company tends to face liabilities.
5. Make sure to ask the company to open up with respect to the existing gross offers and the commission which you tentatively have to pay. This is because, on the application of such offers, you might be able to get more money as compared to the other plans you’re wishing to settle for. Also, on knowing the rate of commission and comparing the same with the other companies on your shortlist, you will be able to know which is more beneficial for you.
6. Ask the company about their desired purchasers, i.e., whether they tend to sell your policy to companies or individuals; this is because the expectations change accordingly. Such expectations include cash value, face value, your life expectancy, amount of premiums to be paid in the future, and other such related matters. It’s important to note that usually, purchaser companies expect bulk policies to be benefitted more and thus, tend to make offers for the same. However, individual purchasers tend to prefer single policies to minimize the premium amount and tend to pay more for such policies. Thus, you can fix the type of policy and choose the agent company accordingly.
7. Make sure to investigate whether the company has the ownership interest in any other life settlement companies; this helps you evade a transaction which is legally a sham according to many states. This concept is called the intra-corporate transaction where the transaction happens between different companies but belongs to one person alone. If your agent company has ownership over another company, you might be directed to sell to the latter, which essentially benefits the former again. This means that, in addition to your commission, your agent company tends to enjoy the benefit from your policy on account of your death. When you cash out life insurance, take precautionary steps.
8. It’s important to investigate whether your agent company usually buys policies for its own investment portfolio; this helps in determining the cost of your policy to a vast extent. This is because in cases of investment options, the agent company becomes the direct purchaser and you can eliminate the commission rates. In addition, you can negotiate for a slightly higher price too than the proposed rates as the policy is required for the development of the company.
9. On shortlisting the desired companies, ask about the tentative recession period they are offering; recession period means you can change your mind after a particular fixed time and get back the ownership of a policy by paying back the gained amount. Depending on your comfort and interest, you can prefer a longer or shorter recession period. However, on getting back the policy, if you wish to sell the same again, the scope might narrow further; this is due to the psychological fact among purchasers that they tend to think you might get back the policy again.
10. Finally, the last most important factor is to consider the error and omissions coverage; this means that the level of coverage that is provided to consumers on the default of employees in the company. Such defaulting means actions like negligence. On knowing the extent of liability, you will be able to understand whether they are personally liable or not liable at all; you will be able to understand if you’re given compensation for their mistakes or not. Technically, it’s advisable that you can go for the company with more liability; this way, you get adequate compensation. However, make sure to refer their past records of paying compensation to know the approximate range.
