Do not compare the two numbers on the front of the offer letters. Ask each party, in writing, for the net amount you would receive after every commission and fee, and set both offers side by side on that figure and nothing else. A gross offer of $142,000 that nets $104,000 loses to a gross offer of $128,000 that nets $118,000, and nothing on the offer sheets will tell you that unless you ask.
The deadline that governs is whichever offer expires first, commonly stated as 7 to 30 days. Ask both parties for a written extension on the same day you receive the second offer. Extensions are routine while a seller is comparing in good faith, and asking for one costs nothing. What is expensive is being pushed into a decision by an artificial clock.
There are six variables that make two offers genuinely different: the net proceeds, the compensation embedded in each, whether any death benefit is retained for your family, who holds the money and on what terms, what conditions must be met before funding, and how long the whole thing takes. Compare all six, in that order.
In This Article
- Variable One: Gross Offer Versus Net to You
- Variable Two: Cash Versus Retained Death Benefit
- Variable Three: Escrow, and Who Actually Holds the Money
- Variable Four: Conditions, Contingencies, and What Can Still Kill It
- Variable Five: Timing, and Variable Six: Who You Are Dealing With
- When the Right Answer Is None of the Offers
- Frequently Asked Questions
Variable One: Gross Offer Versus Net to You
The gross offer is what the buyer is paying for the policy. The net is what lands in your account. Between them sit broker compensation, any referral or finder arrangement, and occasionally administrative or closing charges.
In states that adopted the relevant provision of the NAIC Viatical Settlements Model Act, the compensation paid to a broker in connection with the transaction must be disclosed to the owner. Use that. Ask for a single-page statement listing every party being paid out of the transaction, the amount each receives, and the resulting net to seller. Then compare nets.
Spreads in this market vary widely, and there is no universal standard. What is not acceptable is a refusal to state the number. If one party will produce a clean breakdown and the other will not, you have learned something more useful than either price. Our page on how commission disclosure works explains what you are entitled to see and how to ask for it.
Also confirm what happens to an outstanding policy loan. If the policy carries a $22,000 loan, most structures repay it from the proceeds at closing, which reduces your net by that amount. Two offers can treat a loan differently, and that alone can flip the ranking.
Variable Two: Cash Versus Retained Death Benefit
Some buyers will offer a structure in which you receive less cash, or none, and a stated portion of the death benefit remains payable to your named beneficiary at the insured’s death, with the buyer paying all future premiums. That is not a worse offer. It is a different one, and comparing it to a pure cash offer requires deciding what the household actually needs.
Frame it concretely. On a $500,000 policy, a cash offer might be $95,000. A retained benefit structure might be $40,000 cash plus 15% of the face amount, or $75,000, payable to your children later. Which is better depends entirely on whether you need money now or your family needs money then, and on how you value a future payment you will not see.
Ask three questions of any retained benefit proposal. Is the retained portion a fixed dollar amount or a percentage of face, and does it change if the death benefit changes? Who is contractually obligated to pay it, and is that obligation secured? What happens if the buyer sells the policy on to another investor, which is common in this market? Get the answers in the contract, not in an email. The mechanics are covered further in how a retained death benefit works.
Variable Three: Escrow, and Who Actually Holds the Money
In a properly structured transaction the purchase price is deposited with an independent escrow agent or trustee before the policy ownership changes hands, and the funds are released to you only after the carrier confirms the ownership and beneficiary change has been recorded. Model-based state statutes generally require this structure precisely because the alternative is asking a seller to transfer an asset on trust.
So compare the escrow arrangements explicitly. Who is the escrow agent, and are they independent of the buyer or an affiliate? When are funds deposited — at contract execution, or only after the carrier processes the change? What triggers release, and what triggers return of the policy to you if the deal fails? Is there a deadline after which you may terminate if funding has not occurred?
An offer that is $6,000 higher but funds only after an indefinite carrier processing period, held by an affiliate of the buyer, is not obviously better than a slightly lower offer with funds already on deposit with a named third-party escrow agent. See how escrow works in a life settlement for what a normal arrangement looks like.
| What to compare | Offer A | Offer B | Why it matters |
|---|---|---|---|
| Gross offer | Record the number | Record the number | Starting point only, never the decision |
| All commissions and fees | Request in writing | Request in writing | Disclosure of broker compensation is required in model-act states |
| Policy loan repaid from proceeds | Yes or no | Yes or no | Can change the net by tens of thousands |
| Net to seller | Compare here | Compare here | The only number that is truly comparable |
| Retained death benefit | Amount or percentage | Amount or percentage | Trades cash today for family benefit later |
| Escrow agent and funding trigger | Named third party? | Named third party? | Determines whether you transfer before you are paid |
| Conditions and repricing rights | List them | List them | Execution risk, not price risk |
| Expected days to funding | Estimate in writing | Estimate in writing | Each extra month is another premium and more lapse risk |
| Provider license verified in your state | Yes or no | Yes or no | Free to check; disqualifying if missing |
Variable Four: Conditions, Contingencies, and What Can Still Kill It
Read the conditions precedent. Every offer has them, and they differ.
- Verification of coverage. The buyer requires the carrier to confirm the policy is in force, the face amount, the loan balance, and that the ownership change will be accepted. If the carrier’s answer differs from what was assumed, the offer can be repriced or withdrawn. Our page on the verification of coverage form explains the document.
- Medical re-verification. Some offers permit the buyer to re-underwrite if the closing is delayed beyond a stated window, typically because the life expectancy report has aged.
- Beneficiary or spousal consent. Depending on the state and the policy, an irrevocable beneficiary or a spouse may have to consent in writing. If one offer requires it and the other does not, that is a real difference in execution risk.
- Competency or capacity attestation. Where the insured is elderly or has any cognitive diagnosis, some buyers require a physician attestation of capacity. Better to know at offer stage than at signing.
- Financing contingency. Ask whether the buyer’s funds are committed or subject to a fund drawdown. A committed buyer closes; a conditional one sometimes does not.
Weight these by probability, not by drama. A slightly lower offer from a party with committed capital and no repricing right is worth more than a headline number with three escape hatches.
Variable Five: Timing, and Variable Six: Who You Are Dealing With
A full transaction commonly runs 60 to 120 days from initial review to funded payment, and the carrier’s processing of the ownership change is often the longest single step. If two offers differ by a month in expected funding and you are under premium pressure, the faster one has real value: every additional month is another premium you pay out of pocket, and the risk of a lapse is the risk of losing everything.
On counterparties, do two checks before you weigh anything else. First, confirm the provider’s license in your state of residence through the state insurance department’s public lookup — this takes minutes and is free. Second, ask whether the party making the offer is the actual purchaser or an intermediary who will resell the policy. Neither is disqualifying, but you should know.
Then apply one absolute rule: nobody legitimate asks a policy owner for an upfront fee to obtain or improve an offer. A demand for money up front is the clearest single indicator that you should stop and report it to your state insurance department. There is no version of this transaction in which a seller pays to be considered.
When the Right Answer Is None of the Offers
Comparing offers assumes selling is correct. Sometimes it is not, and the comparison table should include the alternatives you already own.
Keep the policy. If the premium is affordable and a beneficiary genuinely needs the death benefit, the best offer on the table is still worse than doing nothing. The death benefit is generally income-tax-free to the beneficiary under Internal Revenue Code section 101(a); a sale is a taxable disposition.
Reduced paid-up. On a whole life contract, electing reduced paid-up stops the premium permanently and preserves a smaller guaranteed death benefit with no tax event. If the pressure is the premium rather than a need for cash, price this before accepting any offer.
Accelerated death benefit rider. If the insured is terminally or chronically ill, the rider may pay quickly, at no transaction cost, with qualifying payments generally excluded from income under section 101(g). Check the rider before selling.
Surrender. If the best net offer is only marginally above cash surrender value, the simpler transaction may be worth more than the difference.
Benchmark the offers themselves against the public data. The Government Accountability Office study GAO-10-775 found sellers typically received roughly 10% to 35% of face value, and several multiples of cash surrender value. An offer inside that band on a policy with a documented health impairment is a real offer; one far below it deserves an explanation before it deserves a signature.
If you have two offers in hand and want an independent read before choosing, send the policy cover page and both offer letters for a free, no-obligation review, or call (305) 209-7183. Pine Lake Life Solutions provides education and policy reviews only and does not provide legal, tax, or investment advice.
Frequently Asked Questions
Why are two offers on the same policy so far apart?
Different buyers use different life expectancy underwriters, different mortality assumptions, and different required rates of return, and they hold different appetites for specific carriers and product types. A policy that fits poorly in one portfolio can fit well in another. Differences of 50% or more between offers on an identical policy are routine in this market.
Should I always take the highest offer?
Only after converting both to net proceeds and reading the conditions. A higher gross with heavier compensation, an affiliate escrow agent, a repricing right, and an uncertain funding date can easily be worth less than a lower gross that funds cleanly. Rank on net, then on execution certainty, then on timing.
Can I ask both buyers to improve their offers?
Yes, and it is normal. The productive request is not simply asking for more money but supplying something that changes the model, such as updated medical records that shorten the projected life expectancy or a carrier illustration showing a lower minimum premium to keep the policy in force. Price arguments alone rarely move an institutional buyer.
What is a fair broker commission?
There is no single standard, and practices vary. What matters more than the percentage is that the amount is disclosed to you in writing before you sign, along with every other party being paid out of the transaction, and that the net to seller is stated plainly. Refusal to disclose is the signal to walk away.
Can I change my mind after accepting one?
In most states with a life settlement statute, yes, within a defined rescission period. The NAIC model provides a right to rescind before the earlier of 30 calendar days after execution or 15 calendar days after receiving proceeds, and enacting states vary those figures. Ask for the specific citation and deadline for your state in writing.
Should I pay for my own life expectancy report to strengthen my position?
Sometimes, particularly when the buyer priced off a single report built from an incomplete medical file. Independent reports typically cost a few hundred dollars. Coordinate it rather than ordering one unilaterally, so that records are submitted through one channel and the file does not fragment across multiple underwriters.
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Related Reading
- How To Compare Two Life Settlement Offers
- Life Settlement Commission Disclosure
- Retained Death Benefit Option
- Life Settlement Escrow Explained
- Why Life Settlement Offers Vary Between Buyers
- Life Settlement Closing And Funding Explained
- Second Opinion On An Offer
- Verification Of Coverage Form
- Life Settlement Questions To Ask Before Signing
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.