Educational note: This article is provided for educational purposes for financial professionals and does not constitute individualized financial, tax, or legal advice.
Introduction
Financial advisors regularly evaluate investments, retirement strategies, estate plans, and insurance coverage. Yet when an existing life insurance policy no longer serves its original purpose, the secondary market for life insurance may be unfamiliar territory.
What actually happens when a policy is submitted for a life settlement review? Who evaluates the policy? How are institutional buyers approached? And what role does the financial advisor play throughout the transaction?
Understanding the process can help advisors determine when a life settlement evaluation may be appropriate and how to guide clients through their available options.
Step 1: Initial Policy Screening
A life settlement review generally begins with an assessment of the insured and the existing life insurance policy. Common screening considerations include:
- The insured's age and health history.
- The policy's death benefit and cash surrender value.
- Current and projected premium obligations.
- Policy type, including universal life, whole life, survivorship, or convertible term coverage.
- Ownership, beneficiary arrangements, and any applicable restrictions.
Many potential candidates are age 70 or older, although younger individuals with significant health conditions may also qualify. Policies with death benefits of $250,000 or more are commonly evaluated. These are general market considerations, not absolute eligibility requirements.
The purpose of this first step is to determine whether a more detailed evaluation could be worthwhile.
Step 2: Underwriting and Policy Analysis
If the preliminary screening indicates potential eligibility, the next stage generally involves more detailed underwriting. With appropriate authorization, medical information and policy records may be collected and reviewed.
Life expectancy assessments, policy illustrations, premium projections, and other financial information can help potential buyers evaluate the policy.
These factors are important because a life settlement represents an investment in which the purchaser generally assumes responsibility for future premium payments in exchange for the policy's eventual death benefit. An accurate understanding of those obligations is essential to the evaluation process. The NAIC Consumer's Guide to Life Settlements explains these mechanics in more detail.
Step 3: Institutional Buyer Outreach
After the relevant information has been assembled, a life settlement broker may present the case to institutional buyers. Different buyers may have different underwriting assumptions, investment objectives, and pricing criteria. Consequently, the same policy can produce different responses across the marketplace.
This is why buyer competition can matter.
At Accelerated Life Solutions, our brokerage process is designed to help financial professionals explore potential institutional offers while maintaining visibility into the transaction. The objective is not merely to obtain an offer. It is to help the policyowner evaluate available market opportunities and understand the financial implications.
There is no guarantee that every submitted policy will receive an offer. For background on the industry, see the Life Insurance Settlement Association (LISA).
Step 4: Offer Evaluation
When one or more offers are available, advisors and policyowners should evaluate more than the headline settlement amount. Important considerations may include:
- Gross purchase price.
- Broker compensation and other transaction expenses.
- Estimated net proceeds to the policyowner.
- Expected closing requirements and timing.
- The permanent loss of the policy's death benefit.
- Potential tax consequences and changes to financial or estate planning objectives.
A settlement offer should be compared with other available alternatives, including maintaining coverage, surrendering the policy, modifying the policy, or exploring other contractual options. Our guide to lapse vs. surrender vs. life settlement compares these paths, and the IRS discusses tax treatment in Revenue Ruling 2009-13.
Accelerated Life Solutions discloses broker compensation before a transaction is finalized. The policyowner ultimately decides whether an offer is appropriate.
Step 5: Documentation and Closing
If the policyowner elects to proceed, the transaction enters the documentation and closing process. Requirements can vary depending on the policy, buyer, ownership structure, and applicable state regulations.
Closing may involve verification of ownership, beneficiary information, insurer documentation, settlement contracts, and the transfer of policy rights. Funds are generally released through the transaction's established settlement procedures once the necessary closing conditions have been satisfied.
The transaction is not complete merely because a buyer has indicated interest or provided an initial offer. Read more in our life settlement closing process guide.
Why the Financial Advisor Remains Important
A life settlement should not be evaluated in isolation from the client's broader financial circumstances. An advisor may help the client understand how potential settlement proceeds could affect retirement income, estate liquidity, beneficiary objectives, and other planning priorities.
This is especially important when a policy is owned by a trust, was established for estate planning, or remains part of a larger wealth-transfer strategy.
Accelerated Life Solutions operates with an advisor-first approach. Our role is to coordinate the life settlement evaluation, underwriting, institutional buyer outreach, and transaction process while keeping the referring financial professional informed.
You remain the client's advisor. We provide specialized life settlement brokerage support.
How Long Does a Life Settlement Review Take?
The initial review and the complete transaction should be viewed as separate stages.
A preliminary valuation may be available within approximately 24 hours after sufficient initial information is received.
A complete underwriting, bidding, and closing process generally takes longer and depends on the complexity of the case, record availability, buyer requirements, and other transaction considerations.
No specific timeline or settlement outcome is guaranteed.
Experience Matters
Accelerated Life Solutions was founded in 2012, with leadership experience in the life settlement industry dating to 1994.
According to company records, our experience includes:
- 947 documented successful cases
- $3.9 billion in aggregate policy face amount
- An advisor-first brokerage approach
The aggregate face amount represents the total death benefits of the policies involved, not settlement proceeds.
Our experience helps us understand the underwriting, marketplace, documentation, and communication requirements associated with life settlement transactions. Learn more about Brian Hurley.
Have a Client Policy Worth Reviewing?
Start With a Confidential Policy Review
If a client owns a policy that is no longer needed, has become expensive to maintain, or no longer aligns with current planning objectives, a confidential preliminary review may help determine whether a life settlement evaluation makes sense. Not every policy qualifies, and a life settlement is not always the best option.
Frequently Asked Questions
What happens first when a policy is submitted for a life settlement review?
The review begins with an initial screening of the insured's age and health history, the policy's death benefit and cash surrender value, premium obligations, policy type, and ownership and beneficiary arrangements. The goal is to decide whether a more detailed evaluation could be worthwhile.
How long does a life settlement review take?
Qualified submissions may receive a preliminary valuation within approximately 24 hours after sufficient initial information has been received. A complete underwriting, bidding, and closing process generally takes longer. No fixed completion date is guaranteed.
Is every submitted policy guaranteed an offer?
No. Different institutional buyers apply different underwriting assumptions and pricing criteria, and there is no guarantee that every submitted policy will receive an offer.
What role does the financial advisor play during the transaction?
The advisor remains the client's advisor, helping the client understand how potential proceeds could affect retirement income, estate liquidity, and beneficiary goals. Accelerated Life Solutions coordinates the evaluation, underwriting, buyer outreach, and closing while keeping the referring professional informed.
When is broker compensation disclosed?
Accelerated Life Solutions determines broker compensation case by case and discloses it before a transaction is finalized.
This article is provided for educational purposes for financial professionals and does not constitute individualized financial, tax, or legal advice. Eligibility, pricing, and transaction outcomes vary. Broker compensation is determined case by case and disclosed before finalization.
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