For those looking to sell an unwanted life insurance policy have an important decision to make. Should they sell directly to buyers, or go through a life settlements broker? Knowing the roles of each party is crucial to making the best financial decision.

Who Are the Main Parties Involved?

1) Providers – The Buyers

Providers, or institutional buyers, purchase life insurance policies from policyholders. Their goal is to acquire policies for investment purposes, much like purchasing real estate or other assets.

Importantly, no commissions are charged to the seller when working directly with a provider. This can make the process simpler, faster, and more cost-effective for those who value a straightforward transaction. However, because providers are purchasing for investment, they are not obligated to secure the highest possible price for the seller.

Some providers actively market to policyholders by emphasizing the absence of broker commissions, which can indeed help sellers retain more of the offer amount—but it’s important to note that without competitive bidding, the final payout may be lower compared to a brokered sale.

2) Life Settlements Brokers – Working on Behalf of the Policyholder

Life settlements brokers serve as intermediaries between policyholders and multiple providers. Their role is to market the policy to a broad network of providers, creating competition and helping policyholders secure the best possible offers.

While brokers in Canada are not bound by a formal fiduciary duty, reputable brokers are committed to representing the interests of the seller. By marketing the policy to multiple providers and creating competition among buyers, brokers can often help achieve higher payouts than a direct sale might offer. It’s important to note that brokers charge commissions—often shared with referring financial advisors—which are deducted from the final settlement amount. However, even after accounting for these fees, working with a broker could result in a greater net return for the policyholder.

Which Option Is Best for Policyholders?

Choosing between working with a broker or selling directly depends largely on the seller’s priorities:

• For policyholders seeking maximum value, working with a life settlements broker can be advantageous. Brokers market the policy widely, encouraging competitive offers and driving up the potential sale price.
• For those who prioritize speed, simplicity, or avoiding commissions, selling directly to a provider may be more appealing. Direct transactions can be quicker and involve fewer steps, though they often result in lower overall payouts.

Understanding the differences between direct buyers and brokers is key to making an informed decision. Working with a reputable broker may help maximize the value of a life insurance policy, while direct sales offer a more streamlined path.

Are you considering a life settlement for your life insurance policy? Wondering if you’re eligible to sell your life insurance policy? Learn more about selling your policy and find out if you qualify for a life settlement by contacting the experts at Canadian Life Settlements today.