top of page
Logo (background pages) ~ lighter.png

The life settlement process

As with real estate and other significant assets, selling a life insurance policy in the secondary market is usually a lengthy and arduous process because it involves extensive due diligence on behalf of buyers and other parties to the transaction. In effect, investors spend considerable sums of money to buy and then fund an intangible asset in return for a payout at some eventual date, perhaps as distant as fifteen or more years. It's therefore imperative for buyers to gain assurance from legal and other perspectives that all facets of the transaction are handled properly so the investment won't be jeopardized.


Here's a summary of the process, which usually takes from 3-6 months to complete:




The first step is for the policy owner to determine who will advise and represent him or her throughout the process. Among other individuals, this may be a financial planner, life insurance agent, estate planning attorney and/or life settlement broker. Aside from being knowledgeable about and properly licensed for life settlements, whoever is selected should be capable of prequalifying the case from the onset to accurately gauge its marketability and potential value. This matters because it will help to establish realistic expectations and avoid wasted time, effort or money by those involved.

Case development


In order to consider bidding on a case, prospective buyers require various policy- and health-related information for evaluative purposes. The seller's advisor handles all such matters, but needs written authorization from the policy owner and insured to do so. In-force policy illustrations and other information will be obtained from the carrier, as well as medical records from the insured’s health care providers (followed by third-party life expectancy reports). In particular, the medical records and life expectancy reports add notably to the overall duration of the process – possibly up to two or more months – in part because they can't be gathered concurrently.




Once a complete case is assembled, all pertinent documentation is shared with potential buyers for their analysis and bidding. It's in the seller’s best interest to approach only licensed and institutional buyers, and it's critical to market the case to as many of them as possible in an effort to maximize offers for the policy. A fiduciary-minded advisor’s goal during this phase should be to conduct a thorough and systematic auction that isolates the highest bidder.




Assuming the seller accepts the winning offer, the case enters the “closing” phase, during which the prospective buyer issues formal contracts and related documentation for review and completion by the seller. Closing is another time-intensive part of the process because the buyer and its representatives scrutinize all aspects of the transaction for accuracy, leaving no unresolved issues that may stand in the way of a proper and legal transfer.


After the buyer is satisfied with its review, the funds allocated for the purchase are released to third-party escrow, and the escrow agent submits the appropriate forms to the insurance carrier for the changes of ownership and beneficial interest. Finally, the seller typically receives the sale proceeds within three days of the noted changes.

Logo (background pages) ~ lighter.png
bottom of page