How to Tell a Real Provider From a Lead Broker

Check One: The License, Verified by You

The great majority of states regulate this market, most of them following the structure of the NAIC Life Settlements Model Act — the model the NAIC substantially revised in 2007 from its earlier Viatical Settlements Model Act — which requires providers and brokers to be separately licensed, to file their contract forms and disclosure documents with the state, and to maintain an anti-fraud plan.

Verification is a public, free, self-service process. Every state insurance department maintains a licensee lookup, and the NAIC’s Consumer Information Source aggregates company records and complaint history across states. Search by entity name, not by the name of the person who called you, and confirm three things: that the entity appears, that its license is active rather than lapsed, and that the license type says provider or broker rather than something adjacent like “insurance producer.”

Two failure patterns are worth recognizing. The first is a company that gives you a license number belonging to a different entity — a partner, an affiliate, or the individual agent — and hopes you will not read the name on the record. The second is a company licensed in some states but not yours, which matters because these are state-by-state licenses and a license in Florida does not authorize a transaction with an Ohio resident. Our step-by-step on verifying a provider’s license in your state walks through the lookup, and what provider licensing requires covers the substance.

Check Two: Who Pays Them, and When

Ask directly: “Who pays you, how much, and at what point?” A legitimate participant answers in one sentence.

A provider makes money on the spread between what it pays for a policy and what the policy eventually returns. It is not paid by you at all. A broker is paid a commission out of the transaction proceeds, typically negotiated as a percentage of the gross offer or of the amount above a floor, and in many states is required to disclose that compensation to the owner in writing. A lead generator is paid when it hands your information to someone else — which means it is paid whether or not you ever receive an offer, and it has no continuing interest in the outcome.

That last point explains the behavior people find confusing. A lead generator asks for your name, phone number, age, and policy size, and then the calls start from three or four companies you never contacted. The information you gave was the product.

Under no circumstances does the policy owner pay a fee up front. Not an application fee, not a processing fee, not an appraisal or valuation fee, not a “file setup” charge. There is no legitimate version of that request in this market. See who pays whom in a settlement for the full compensation map.

Check Three: What They Ask For First

The opening request is diagnostic, and it separates the categories faster than anything on a website.

A provider or broker asks for policy information: carrier, policy number, face amount, policy type, issue date, current premium, whether there is a loan, and who owns the policy on the carrier’s records. That is what is needed to evaluate whether a transaction is possible.

A lead generator asks for contact information: name, phone, email, ZIP code, age, and a rough policy size. Notice what is missing — the carrier, the policy type, the ownership. Those details do not matter to someone whose business is transferring you to a buyer.

Anyone asking for a Social Security number, bank account details, or a signed medical authorization in a first conversation is out of sequence regardless of what they call themselves. Medical authorizations belong in stage three of a review, after you have decided to proceed, and a valid HIPAA authorization under 45 C.F.R. 164.508 must name the providers, state a purpose, carry an expiration date, and explain how to revoke it. An open-ended authorization presented on day one is a document to refuse.

Question	Licensed Provider	Licensed Broker	Lead Generator
State license required?	Yes, as a provider	Yes, as a broker	Usually none
Who pays them	Earns the spread on the policy	Commission from transaction proceeds	Paid for your contact information
Represents whom	Itself and its capital	The policy owner	Nobody
Asks for first	Carrier, policy type, face amount	Carrier, policy type, face amount	Name, phone, ZIP, age
Will say your policy does not qualify	Yes	Yes	Rarely
Handles escrow and closing	Yes, via independent escrow agent	Coordinates it	No
Can state your rescission period	Yes	Yes	No

Check Four: Whether They Will Tell You the Answer Is No

This is the least technical test and the most reliable one.

Describe a disqualifying fact and see what happens. Say the face amount is $40,000. Say the policy was issued eight months ago. Say the insured is 61 and in excellent health. Each of those makes a transaction unlikely or impossible — small policies fall below the roughly $100,000 threshold where fixed transaction costs can be absorbed, policies inside the two-year contestability period generally cannot be transacted, and a healthy insured in their early sixties produces a projected life expectancy that compresses offers toward surrender value.

A provider or broker will say so, because their time has a cost. A lead generator will tell you it sounds promising and ask for your phone number, because their revenue does not depend on whether a transaction is possible.

The same test applies to alternatives. Ask what else you should consider. Anyone who cannot immediately name surrender value, reduced paid-up, extended term, a 1035 exchange, and the accelerated death benefit rider that may already be in your contract is not evaluating your situation. They are processing you.

Check Five: The Mechanics of Closing

Ask how the money moves. There is one correct answer: proceeds are placed with an independent escrow agent — typically a bank or trust company — and released to you only after the carrier confirms the change of ownership has been recorded. Funds never travel directly from a buyer to a seller, and no legitimate participant asks you to sign the change-of-ownership form before escrow is funded.

Ask about rescission. Most states, following the NAIC model, give the policy owner a period after closing during which the transaction can be unwound — commonly 15 calendar days from receipt of proceeds, though the period is set by each state’s statute and is not uniform. A company that cannot state your state’s rescission period, or that describes the sale as final on signature, is telling you something important.

Ask about disclosures. Licensed participants in most states are required to deliver specified written disclosures at or before the time of application, covering the alternatives to a settlement, the possible tax consequences, the possible effect on public assistance eligibility, the fact that the buyer may resell the policy, and the ongoing contact the buyer may have with the insured after closing. If you receive no disclosure packet at all, you are not in a regulated transaction.

Industry membership is a weak signal but not a useless one. The Life Insurance Settlement Association is the market’s principal trade body and maintains member listings; membership is not a license and should never be accepted as a substitute for one.

The Alternatives a Real Firm Will Raise Unprompted

Any of these can beat a settlement, and the willingness to say so is itself a credential.

Keep the policy. Death benefits generally pass to beneficiaries income-tax-free under Internal Revenue Code section 101(a). Nothing else matches that if the coverage is needed.

Surrender. Immediate cash surrender value. Gain above cost basis is ordinary income. The floor any offer must beat.

Reduced paid-up. A smaller fully paid policy in exchange for the cash value, with no further premiums ever.

Extended term. Full face amount for a limited number of years, no further premiums.

1035 exchange. Move cash value into another life policy or an annuity with no current tax under section 1035.

Accelerated death benefit. If the rider is in the contract and the insured qualifies, it pays without a buyer, an escrow, or a fee. Payments to a terminally or chronically ill insured are generally excluded from income under section 101(g).

Life settlement. Worth pursuing only when it beats all of the above after tax. Federal research (GAO-10-775) found sellers historically received roughly 10% to 35% of face value.

When the Right Answer Is Not to Sell at All

A settlement is the wrong answer when a surviving spouse, a disabled adult child, or an estate with illiquid assets still needs the death benefit and the premium is payable. It is wrong when the net death benefit is under roughly $100,000, where the realistic expectation is no offers rather than low ones. It is wrong when the insured is in strong health for their age. It is wrong when an accelerated death benefit rider already in the contract would deliver cash faster, cheaper, and without giving up all coverage. And it is wrong when a lump sum would end SSI or Medicaid eligibility — both are asset-tested, and the federal SSI resource limit has been $2,000 for an individual and $3,000 for a couple since 1989.

It is also the wrong answer whenever only one buyer has seen the file. A single offer is not a market price; it is one fund’s bid, shaped by that fund’s mandate. If a company discourages you from getting a second look, that is the answer to the question this page is about.

To start with an honest read on whether your policy is even in range, send the policy cover page for a free, no-obligation review, or call (305) 209-7183. Further reading: what a provider is, what a broker is, how the two differ, how to choose a company, and the scam patterns to watch for. Pine Lake Life Solutions provides educational information only and does not provide legal, tax, or investment advice.

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Frequently Asked Questions

What is the fastest way to tell them apart?

Ask for the entity’s license number and license type, then look it up yourself on your state insurance department’s site or through the NAIC Consumer Information Source. Confirm the name on the record matches the company that contacted you, that the license is active, and that the type says provider or broker.

Is a broker worse than a provider?

No, they are different roles. A broker represents the policy owner and shops the policy to multiple providers, which frequently produces a better gross number, but is paid a commission out of the proceeds. A provider buys directly with no commission layer. What matters is that both are licensed and that compensation is disclosed.

Why am I suddenly getting calls from several companies?

Because a lead generator sold your information. That business is paid when it transfers your contact details, whether or not any transaction is possible, which is why the calls continue even for policies that could never qualify. Ask each caller for a license number and stop responding to those who cannot supply one.

Should I ever pay a fee to have my policy evaluated?

No. There is no legitimate upfront fee in this market. Application fees, processing fees, appraisal fees, and file setup charges are all warning signs. Compensation flows out of a completed transaction, which means nobody gets paid unless you receive money first. Any request for payment before closing should end the conversation.

What disclosures should I receive?

In most states, a written packet at or before application covering the alternatives to a settlement, possible tax consequences, possible effects on public assistance eligibility, the fact that the policy may be resold, and the buyer’s ongoing contact with the insured after closing. No disclosure packet means you are not in a regulated transaction.

How does the money actually reach me?

Through an independent escrow agent, usually a bank or trust company, which releases funds only after the carrier confirms the change of ownership has been recorded. Funds should never move directly from a buyer to a seller, and you should never sign the change-of-ownership form before escrow is funded.

Does trade association membership mean a company is legitimate?

It is a weak positive signal and never a substitute for a license. The Life Insurance Settlement Association is the market’s main trade body, but membership is voluntary and carries no regulatory force. The state license lookup is the check that matters, and it takes about ten minutes.

Related Reading

• What Is A Life Settlement Provider
• What Is A Life Settlement Broker
• Life Settlement Provider Vs Broker
• Verify Provider License State
• Broker Vs Provider Who Pays
• Life Settlement Scams Red Flags
• What Is Life Settlement Provider Licensing
• How To Choose A Life Settlement Company

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Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.