Who Does a Life Settlement Broker Represent?

Rebecca Parson
Rebecca Parson

Rebecca Parson


Rebecca Parson is a financial and tech writer with 10 years of experience writing about topics such as life insurance, commodities investing, and the SaaS industry. She has a master’s degree from Johns Hopkins University and a bachelor’s degree from the University of Mary Washington. Her writing has appeared at money.com, sacbee.com, cart.com, herodevs.com, blanchardgold.com, and more.

Brian OConnel
Brian OConnel

Brian O'Connel


Brian O’Connell has been a contributing writer for U.S News & World Report since 2016. A former Wall Street bond trader and the author of two best-selling books; “The 401k Millionaire” and “CNBC’s Creating Wealth”, he has 20 years experience covering business news and trends, particularly in the business and financial sectors. He believes education is the best gift a financial consumer can receive – and brings that philosophy to every story he writes. His byline has appeared in dozens of top-tier national business publications, including CBS News, Bloomberg, Time, MSN Money, The Wall Street Journal, CNBC, TheStreet.com, Yahoo Finance, CBS Marketwatch, and many more.

By Rebecca Parson, Brian O'Connel
Author, Contributor, Life Insurance

When looking for a suitable life settlement broker, it is essential to research several key areas thoroughly and to understand who does a life settlement broker represent.

Who Does a Life Settlement Broker Represent?

A life settlement broker represents the policy owner. Life settlement brokers should be bound by a fiduciary duty to work in the best interest of the policy owner.

Life Settlement Brokers are legally obligated and have a fiduciary responsibility to work in the interests of the policy owner they represent. This fiduciary responsibility means that they must act in the best interest of the policy owner in all aspects of the transaction, including obtaining the best possible offer for their policy.

Brokers are not permitted to work for the provider and the policyholder in a single transaction, as this would present a conflict of interest.

What is Fiduciary Responsibility?

Fiduciary responsibility refers to a legal obligation to act in the best interest of another party. This concept is commonly used in financial and business contexts, where one party is entrusted to manage assets or make decisions on behalf of another. The party with fiduciary responsibility is the fiduciary, while the represented party is the beneficiary.

Fiduciary responsibility can arise in various relationships, such as between a company’s leadership and its shareholders or between a broker and their client. In these scenarios, the fiduciary must prioritize the interests of the shareholders or clients over their interests. 

Who Has Fiduciary Responsibility?

Several roles may have fiduciary responsibility, including:

  • Company executives and board members: As mentioned above, the leaders of a company have a fiduciary duty to act in the best interest of its shareholders.
  • Trustees: Those appointed to manage assets on behalf of beneficiaries, such as in trusts or estates, also have fiduciary responsibility.
  • Financial advisors and brokers: These professionals manage their client’s investments and have a fiduciary duty to act in their best interest.
  • Attorneys: Lawyers have a fiduciary responsibility toward their clients, meaning they must prioritize their client’s interests above their own.
  • Public officials: In some cases, public officials may also have a fiduciary responsibility, as they are expected to act in the public’s best interest.

What Are the Duties and Obligations of Fiduciaries?

Fiduciaries have several duties and obligations that they must fulfill, including:

  • Duty of care: Fiduciaries must act reasonably and diligently in their responsibilities.
  • Duty of loyalty: Fiduciaries must always act in the beneficiary’s best interest, even if it goes against their own interests.
  • Duty to disclose: Fiduciaries must provide all relevant information and be transparent.
  • Duty to avoid conflicts of interest: Fiduciaries must avoid any situation where their interests may conflict with the beneficiary’s.

Do Life Settlement Brokers Owe a “Fiduciary Duty” to Their Clients?

Most states consider life settlement brokers to have a fiduciary duty towards their clients. This consideration is because they are trusted with managing the sale of a life insurance policy on behalf of the policy owner and must act in their best interest.

However, it is important to note that some states may not explicitly define this duty, so it is always best to consult a legal professional for specific guidance.

What Type of License Does a Life Settlement Broker Need?

Life Settlement Brokers must also obtain a separate license to operate in the life settlement market. The specific requirements for obtaining this license may vary depending on the state. Still, generally, brokers must complete an application process, provide personal and business information, and demonstrate a sound financial track record.

Additionally, brokers may need to pass a background check and complete pre-licensing education or training. It is essential for brokers to thoroughly understand the regulations and licensing requirements in the states where they intend to conduct business, as well as any ongoing educational or renewal requirements.

who does a life settlement broker represent
A reputable broker will have a transparent and efficient method to obtain offers from a large pool of qualified buyers.

Key Factors to Consider When Choosing a Life Settlement Broker

Firstly, ensure that the broker is licensed in your state and adheres to the regulations established by your state’s Department of Insurance. Licensing ensures the broker operates within legal bounds and maintains the qualifications to conduct business in the life settlement industry.

Secondly, delve into the broker’s track record and recent successful policy sales. A reputable broker will have a history of satisfied customers and successful life settlements. Online reviews, testimonials, and any industry awards or recognitions can provide insight into a broker’s reputation.

Lastly, evaluate the broker’s transparency and communication skills. A good broker will provide clear, concise information, answer your questions thoroughly, and keep you informed throughout the life settlement process.  

Remember: A life settlement broker is responsible for negotiating the highest possible price for your policy, so it’s crucial to choose someone trustworthy, experienced, and committed to your best interests. It’s also important to note that a broker should never charge any upfront fees for their services.

Related Read: Life Settlements: How To Sell Your Life Insurance Policy (2024 Guide)

In addition to these factors, it’s important to research the level of experience and expertise a broker has in handling similar policies. Each policy is unique, so having a broker who understands the complexities of your specific policy can significantly benefit you in obtaining the best possible settlement offer.

When considering potential brokers, inquire about their process and timeline for securing offers. A reputable broker will have a transparent and efficient method to obtain offers from a large pool of qualified buyers.

Interested in learning the potential value of selling your life insurance policy? Check out our instant life settlement calculator.

What Should I Ask My Life Settlement Broker?

When choosing a life settlement broker, consider the following questions to guide your selection:

  1. What Is Your Experience With Life Settlements? It’s important to work with a broker who has a solid understanding of the life settlement industry, is trustworthy, and has a proven track record of success in this field. Ask about their experience, how long they have been in business, and if they specialize in specific types of policies.
  2. How Do You Determine The Value Of My Policy? Life settlement brokers use various factors to determine a policy’s value, including age, health status, and policy details. Ask potential brokers about their valuation process and what factors they consider to determine the value of your policy.
  3. What Is Your Network Of Buyers Like? A broker’s network of buyers can significantly impact the outcome of your life settlement. Ask about their relationships with potential buyers and how they market policies to them. A diverse and extensive network may result in a higher offer for your policy.
  4. How Do You Handle Confidentiality? Confidentiality is important, especially when it comes to a life insurance policy. Ensure the broker has measures to protect your health and financial information throughout the process.
  5. Can You Provide References From Past Clients? Be bold and ask for references from other clients who have worked with the broker before. This research will give you an idea of their overall satisfaction and success with the broker’s services.
  6. What Is Your Commission Structure? Understanding how a broker will be compensated for their services is essential. Ask about their commission structure and if it aligns with your goals for selling your policy.
  7. How Long Does The Process Typically Take? The life settlement process can vary in length, but it’s important to know how long it may take. Ask the broker for an estimated timeline so you can plan accordingly.
  8. What Is Your Success Rate? A broker’s success rate in securing life settlement offers can indicate their expertise and effectiveness in the industry. Ask about their success rate and what factors contribute to it.
  9. How Often Will I Receive Updates On My Policy? Keeping up-to-date on the progress of your life settlement is essential. Ask the broker how often he will send updates and what information he will include in these updates.
  10. Do You Have Any Conflicts Of Interest? Ask the broker if they have any potential conflicts of interest that could interfere with their ability to represent your best interests.

Can I Fire My Life Settlement Broker?

The short answer is yes, you can fire your life settlement broker. However, as with any other area of contract law, there are specific steps and considerations to consider before making this decision.

It is important to stress that a broker cannot force you to sell your policy. Even if you signed a contract with a life settlement broker, it just gives him the right to bring your policy to market. You must decide whether or not to sell once you receive investor offers.

You will enter into a legally binding contract when you hire a life settlement broker. Most brokers will include an exclusivity clause in the agreement, stating that you cannot work with any other broker while the contract is in effect.

If you decide you no longer want to sell your policy, notify your broker in writing that you wish to terminate the contract. If you are still deciding, it is always best to seek advice from a financial advisor or lawyer before making any decisions.

Related Read: Alternatives To Selling Your Life Insurance Policy

On the other hand, if you are unhappy with your broker’s performance and want to switch to a new one, there are a few things that you should keep in mind. 

Here are some important points to consider:

Understanding Your Contract

Before making any moves to terminate your relationship with your life settlement broker, it is crucial to review and understand the terms of your contract. This document will outline the rights and responsibilities of both parties and may contain specific clauses regarding termination.

If your contract has an exclusivity clause, you may need to wait until it expires before you can switch to a new broker. 

All brokers include this in their contracts before working with a policy owner. A broker invests significant time and money to bring a life insurance policy to the market. 

The exclusivity clause guarantees the broker will receive compensation if the policy sells. It is also a way to protect the policy owner from being approached by multiple brokers, which could be overwhelming.

Communicate Your Concerns

Before terminating your contract, you must communicate concerns or issues with your current broker. They may need to be made aware of the problem and can work towards finding a solution. It is always best to resolve conflicts or misunderstandings before taking more drastic action.

Reasons for Terminating Your Broker

Here are several valid reasons that policyholders often give when deciding to terminate their life settlement broker:

  • Inadequate Communication: The broker needs to keep you updated about the progress of the policy sale, respond to your queries promptly, or explain the process and potential outcomes.
  • Poor Performance: The broker needs to attract potential buyers or secure satisfactory offers for your policy. A lack of results can be a strong indicator that it might be time to switch brokers.
  • Unethical Practices: You suspect or discover that the broker has engaged in unethical practices, such as misrepresentation of the policy’s value, failure to disclose all offers, or acting in their own best interests rather than yours.
  • Hidden Charges: The broker has hidden fees that must be clearly outlined in the contract, making the process more costly than anticipated.
  • Unprofessional Behavior: The broker displays unprofessional behavior, such as a lack of punctuality, disrespectful communication, or disregarding your circumstances and needs.

Additionally, you may not have a good working relationship with your current broker. This is also a valid reason to consider terminating the contract and finding someone who better meets your needs and expectations.

5 Steps for Firing Your Broker

If you have decided to fire your life settlement broker, here are some steps to follow:

  1. Review your contract: As mentioned before, it is essential to understand any terms and conditions regarding termination in your contract.
  2. Give notice: Before terminating the contract, you should give written notice to your broker stating that you wish to end the agreement. This notice will ensure that there is a record of the termination and can help avoid any potential disputes.
  3. Pay any applicable fees: If you owe any fees or penalties outlined in your contract for early termination, pay them before terminating. Alternatively, you can wait for the exclusivity period to expire before terminating the contract. 
  4. Find a new broker: Once you have officially terminated your relationship with your current broker, you are free to find a new one as soon as possible. 
  5. Keep records: It is always a good idea to keep a record of all communication and documents related to the termination of your broker. These records may be helpful in case of any disputes or legal issues.

Working with Your New Broker

Once you have found a new broker, it is essential to communicate clearly and effectively with them. Make sure to discuss your expectations, concerns, and specific goals for the life settlement process. Proper communication will ensure a positive working relationship, hopefully leading to better results.

At Beca Life, we understand that selling a life insurance policy can be complex and emotional, so we are committed to providing support and guidance. When you feel ready to speak to one of our life settlement experts, you can contact us to learn whether a life settlement is a viable option.

Which Option Is Better: Working With A Life Settlement Broker Or Selling Directly To An Investor?

Sometimes, it makes sense to work with a life settlement broker, while in other cases, it may be better to sell directly to an investor. To better understand which option is best for your specific situation, it’s essential to understand the differences between working with a broker and selling directly.

When Is It Appropriate To Engage The Services Of A Life Settlement Broker?

A Life Settlement broker offers sellers several advantages in selling their existing life insurance policies. The broker serves as a mediator between the seller and the potential buyer, making it easier for both parties to negotiate professionally and reach an agreement. Additionally, working with a Life Settlement broker ensures that the seller receives the highest offer for their policy based on current market conditions. They have a large network of investors and can reach a large pool of buyers they regularly work with, increasing the chances of getting a higher payout for the policy.

Moreover, Life Settlement brokers have experience navigating the complex world of life settlements and can provide valuable guidance and advice throughout the process. They handle all paperwork and communication with the buyer on behalf of the seller, making it less stressful and time-consuming.

In addition, Life Settlement brokers have a deep understanding of the complex life insurance industry and can provide insights and guidance throughout the selling process. They can assist in navigating through the legal and financial aspects of selling a policy, ensuring that all necessary documentation is completed timely and correctly submitted to the insurance company.

Another advantage of working with a Life Settlement broker is their ability to negotiate on behalf of the seller. They have strong negotiating skills and can help secure the best possible offer for the policy, saving sellers time and effort in dealing with multiple buyers.

The fees involved are the most significant drawback when working with a life settlement broker. 

Brokers charge a percentage of the final sale price of the policy, which can range from 15%-30%. This means sellers may receive a lower payout for their policy than selling directly to an investor.

When Is It Better To Sell Directly To An Investor?

In some cases, it may be more beneficial to sell your policy directly to an investor without the help of a broker. This is typically true for policies with a low face value or when the seller already has a potential buyer lined up.

Selling directly to an investor can also save time and money, as no broker fees are involved. The seller can negotiate directly with the investor and may be able to secure a higher payout for their policy compared to going through a broker.

However, the downside of selling directly to an investor is that there is a smaller pool of potential buyers, and therefore, it may take longer to find a buyer and close the sale. Additionally, without the guidance and expertise of a broker, sellers may not be aware of current market conditions and may accept a lower offer than what their policy is worth.

In conclusion, whether to work with a Life Settlement broker or directly with a buyer ultimately depends on the seller’s specific situation and needs.

What Are The Licensing Requirements In The Life Settlement Market?

In life settlements, various entities necessitate licensing to operate legally and effectively. Primary among these are life settlement providers, individuals, or companies who purchase life insurance policies from policyholders or facilitate the sale of the policies. 

Furthermore, life settlement brokers must obtain licensing as intermediaries between providers and policyholders. This requirement ensures that all parties are protected and held accountable for their actions.

Life Settlement Providers

Licensing is crucial for the ethical and transparent operation of life settlements and provides a measure of security and transparency to policyholders. 

Life settlement providers require state licensing to ensure compliance with state regulatory standards and to safeguard the interests of the policy owner and the investor purchasing the policy. Licensing legally obligates providers to follow established guidelines and ethical practices, which include maintaining the privacy and confidentiality of policyholders’ information. 

Moreover, it certifies the provider’s knowledge and expertise in the industry, adding a layer of trust and credibility. In case of any misconduct or violation of terms, the license is a legal tool to hold the providers accountable. 

What Are The Fiduciary Responsibilities Of Life Settlement Providers?

The fiduciary responsibility of a Life Settlement Provider is a legal obligation to act in the best interest of their clients. This fiduciary responsibility includes ensuring that all transactions are conducted transparently and ethically and that all provided information is accurate and comprehensive. It also involves ensuring that the selling party receives a fair price for their policy based on a thorough and honest assessment of its value. 

The provider must also ensure they comply with all relevant state and federal laws regarding life settlements. Any violations of these fiduciary duties can result in legal repercussions such as fines, sanctions, or revocation of the provider’s license.

How are Life Settlement Brokers Typically Compensated? 

Life settlement brokers receive a commission based either on the total settlement amount or the face value of the policy. Typically, life settlement brokers charge a commission of fifteen to thirty percent of the settlement amount. The commission will vary based on the case’s complexity, how much the broker has to invest to bring it to market, and the expected settlement amount. 

This commission structure allows life settlement brokers to earn fair and reasonable compensation for their services while aligning their interests with the policy seller. Since they are paid based on the final settlement amount, it is in the broker’s best interest to negotiate the highest possible offer from potential buyers.

Why Is The Life Settlements Commission Rate Higher Than Many Other Industries?

To bring a policy to market, life settlement brokers must invest significant time and resources to evaluate the policy, get the requisite medical and policy documentation, and purchase life expectancy reports. The broker will then work on finding potential buyers and negotiating offers. This process can take months or even years to complete. Life settlements are also complex financial transactions requiring specialized knowledge and expertise to navigate successfully.

Brokers also must share the commission with an introducing broker, an insurance agent, or a financial adviser who brings the policy to the life settlement broker. A policy owner can often negotiate a more favorable commission structure if he approaches a life settlement broker directly rather than going through a financial advisor or general insurance agent. 

Can I Avoid a Brokerage Commission by Going Direct?

Yes and No. There are several companies that purchase policies directly from the policy owner. Coventry Direct is the largest of these companies, which advertises extensively as a direct purchaser. However, it is important to note that these companies usually do not hold the policies they purchase. When they purchase a policy, they will resell it to an investor for a significant profit. In effect, the seller is paying a commission in the form of a lower selling price. Many policy owners prefer the transparency of a broker where they know who is making what of their policy.

Do I pay a Commission if I Back Out of the Sale?

No. The commission is only paid out if the sale of the policy is successful. If, for any reason, the seller decides not to proceed with the sale, they are not responsible for paying any commission to the life settlement broker. This removes any risk or financial burden for the policy owner and allows them to explore their options without added pressure.

Need a Second Opinion on the Sale of Your Life Insurance Policy?

At Beca Life, we take a different approach. We work with both buyers and brokers, tailoring our services to meet each client’s unique needs and goals. Whether you seek the highest possible offer or a quick sale, we help you get the best deal possible.

When you feel ready to speak to one of our life settlement experts, you can contact us to learn whether a life settlement is a viable option.

Sell your life insurance policy for cash.

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