Ask question four first: “Are you licensed as a life settlement broker or provider in my state, and what is your license number?” Everything else is negotiable; that one is not. Verifying the answer takes about five minutes on your state insurance department’s website or a phone call to its consumer services division, costs nothing, and eliminates the majority of bad actors before they ever see your medical records.
The second thing to get straight, before any of the twelve, is whether you should be selling at all. A settlement is irreversible after the rescission window closes. Your beneficiaries are removed. The coverage is gone. For a large number of people who reach this point, the better answer is a face reduction, a reduced paid-up election, or simply continuing to pay a premium that turns out to be affordable once it is re-solved properly. Those alternatives cost nothing to investigate and should be priced before you accept any offer.
What follows is a working list you can take to a phone call. Write down the answers. A legitimate company will answer all twelve without hesitation and will put the material ones in writing. Hesitation, deflection, or pressure on any of them is information. Pine Lake Life Solutions provides education and a free policy review; nothing here is legal, tax, or investment advice.
In This Article
Questions 1 to 3: Should I Be Selling at All?
1. What is this policy worth if I keep it, restructured? Ask the carrier for an in-force illustration at three levels: your current premium, the minimum premium required to carry the policy to age 100 on guaranteed assumptions, and the projected lapse date if you pay nothing further. People routinely discover the real premium is lower than the one they have been paying, or that a face reduction from $400,000 to $150,000 makes the policy comfortably affordable.
2. What are my non-forfeiture options, in writing? Whole life contracts contain reduced paid-up and extended term options that convert existing cash value into coverage with no further premium. The resulting numbers are specific and the carrier must provide them. Compare the reduced paid-up death benefit to any settlement offer before deciding — sometimes keeping a smaller paid-up policy is worth more to the family than a modest lump sum.
3. Do I have a rider that pays without selling? Accelerated death benefit and chronic illness riders let the carrier advance part of the death benefit directly. Amounts received on account of terminal or chronic illness are generally excluded from income under Internal Revenue Code section 101(g), subject to that section’s requirements, and no third party, commission, or ownership change is involved. Check the rider schedule before anything else. Our overview of accelerated death benefit riders explains the trade-offs.
Questions 4 to 6: Who Am I Actually Dealing With?
4. Are you a licensed broker or a licensed provider in my state, and what is the license number? These are different roles. A provider buys the policy. A broker shops it to multiple providers. Both are licensed in most states, separately. Verify the number yourself with the state insurance department rather than accepting a screenshot. If a company says licensing does not apply to it, end the call.
5. Who do you represent in this transaction? In a substantial number of states, a life settlement broker owes a fiduciary duty to the policy owner and to no one else. A provider represents the buyer’s capital. Both roles are legitimate; conflating them is not. Ask the question directly and note the answer.
6. How and when are you paid, and how much? A broker is typically compensated from the transaction at closing, most often as a percentage of the gross offer or of the face amount. Many states require that compensation be disclosed to the owner. Ask for the dollar amount and the percentage, in writing, before you accept an offer. And note the hard rule: no legitimate participant asks a policy owner for an upfront fee to obtain an offer. A request for money in advance is a reason to stop, and a documented pattern in this industry.
Questions 7 to 9: About the Money
7. How many providers saw my file, and what did each one offer? Ask for the bid history in writing: which licensed providers received the file, which declined, which bid, and at what amounts. Offers on the same policy routinely differ by a wide margin because buyers hold different mortality assumptions and different return targets. A single offer presented as “the market” is not the market.
8. What is the gross offer, what is deducted, and what will I actually receive? The number that matters is net to you after broker compensation and any closing costs, wired to your account. Get it as a dollar figure. Then compare it against three benchmarks: the cash surrender value, the reduced paid-up death benefit, and the total premiums you would pay to keep the policy for five more years.
9. How will this be taxed, and what forms will I receive? The framework changed with the Tax Cuts and Jobs Act of 2017, which amended Internal Revenue Code section 1016(a)(1) so that a seller’s basis is no longer reduced by cumulative cost-of-insurance charges — a change applied retroactively to transactions after August 25, 2009. The same act added section 6050Y reporting, so a reportable policy sale generates Form 1099-LS and Form 1099-SB. Take those forms and your premium history to your own CPA. Anyone who tells you the proceeds are simply tax-free is guessing.
| # | Question | What a Good Answer Looks Like |
|---|---|---|
| 1 | What does the policy cost to keep, re-solved? | A carrier in-force illustration at three premium levels |
| 2 | What are my non-forfeiture options? | Specific reduced paid-up and extended term figures in writing |
| 3 | Do I have a rider that pays without selling? | A copy of the rider schedule and the carrier’s claim requirements |
| 4 | Are you licensed in my state? | A license number you can verify with the insurance department |
| 5 | Who do you represent? | A direct answer: broker for the owner, or provider for the buyer |
| 6 | How are you paid? | Dollar amount and percentage, disclosed in writing, paid at closing |
| 7 | How many providers bid? | A written bid history naming who saw the file and what they offered |
| 8 | What do I net? | One dollar figure after all deductions |
| 9 | How is it taxed? | Forms 1099-LS and 1099-SB explained, and a referral to your own CPA |
| 10 | Who holds the money? | An independent escrow agent you can verify |
| 11 | What is my rescission window? | A statutory citation and a calendar date |
| 12 | Who contacts me afterward? | A named servicer, a stated interval, and the option to designate a contact |
Questions 10 to 12: What Happens After I Sign
10. Where is the money held, and when is it released? Funds should sit with an independent escrow agent, not with the buyer or the broker, and should be released to you only after the carrier confirms the change of ownership. Ask for the escrow agent’s name and confirm it independently. Payment before the ownership transfer completes is not how the process works, and payment held by the buyer after it completes is not either.
11. How long is my rescission window and when does it start? Most states adopted a version of the NAIC model provision allowing the owner to unwind the transaction within a short period — commonly around fifteen days from receipt of proceeds, though the exact period and trigger are set by state law. Ask for the specific statutory citation and the calendar date, and write it down. Rescission generally requires returning the money.
12. Who will contact me afterward, how often, and can I name someone else? The new owner will periodically verify whether the insured is living. State law limits how often: the model provision permits contact about health status no more than once every three months where life expectancy exceeds a year, and no more than monthly where it is a year or less. You may usually designate a third party — an adult child or an attorney — to receive those inquiries instead. Ask for that in writing at closing.
When the Answers Tell You Not to Sell
Several answer patterns should end the process, and a company acting properly will say so before you do.
- Your death benefit is under roughly $100,000. Underwriting a policy costs the buyer a similar amount whatever the face value, so small policies rarely attract offers. Pine Lake works with policies of roughly $100,000 or more in death benefit; below that, the honest answer is usually that no market exists.
- Someone still needs the coverage. A spouse without a pension survivor benefit, a disabled adult child, an estate with an illiquid business. Those are reasons to reduce the face amount to something affordable, not to sell.
- You are healthy and under 70. Offers are driven by life expectancy underwriting. Good health means a long projection and a thin offer, often less than what the policy is worth to you kept.
- The offer barely beats cash surrender value. If the net proceeds are close to what the carrier would hand you for a signature, the added complexity, disclosure, and delay may not be worth it.
- You are receiving needs-based benefits. A lump sum can interrupt Supplemental Security Income, Medicaid, or housing assistance. Plan for that with an elder law attorney before you sign, not after.
- The policy is inside its contestability period. Policies issued within roughly the past two years are generally not marketable and raise questions you do not want to invite.
How to Run the Call
Set aside forty-five minutes and have three documents in front of you: the policy cover page, the most recent annual statement, and the current premium notice. Ask the twelve questions in order and write the answers down verbatim, including the ones that come back vague. Ask for anything material to be confirmed by email, which creates a record and slows down anyone hoping you will decide quickly.
Do not sign a medical authorization on the first call. Do not accept an offer on the first call. A legitimate process assumes you will take a week, talk to your family, and ask your own advisor. If you are being told an offer expires in twenty-four hours, that pressure is the product, not the timeline — real offers are typically held open for a defined period and reissued if underwriting is still current.
Bring your own people in. An attorney if a trust, a power of attorney, or public benefits are involved; a CPA on the tax question; and the family members who will be affected by the coverage ending. Working with your own advisor costs a fraction of what a bad transaction costs.
For a free, no-obligation review, send just the policy cover page or call (305) 209-7183. If the answer is that your policy has no market value, or that keeping it is the better outcome, you will hear that directly. Pine Lake Life Solutions provides educational information only and does not provide legal, tax, or investment advice.
Frequently Asked Questions
Which of the twelve matters most?
Licensing. Verify the broker’s or provider’s license number with your state insurance department before releasing any medical information. It takes five minutes, costs nothing, and screens out most bad actors. Everything else on the list is a negotiation; that one is a gate.
Should I ever pay a fee to get an offer?
No. Legitimate brokers and providers are compensated out of the transaction at closing, not in advance. A request for an upfront application fee, appraisal fee, or processing fee from the policy owner is one of the most reliable warning signs in this market. Stop and report it to your state insurance department.
How do I know whether a single offer is a good one?
Ask for the bid history: which licensed providers received the file, which declined, and what each one bid. Offers on identical policies vary widely because buyers use different mortality assumptions and return targets. One offer presented without that context tells you nothing about the market.
Can I change my mind after I sign?
Usually yes, within a short statutory rescission window. Most states adopted the model provision allowing the owner to unwind the transaction within roughly fifteen days of receiving proceeds, though the exact period and trigger vary by state. Ask for the citation and the calendar date, and expect to return the money.
What should I compare an offer against?
Three numbers. The cash surrender value the carrier would pay you today. The reduced paid-up death benefit your existing cash value would buy with no further premium. And the total premium you would spend to keep the policy five more years. If the offer does not clearly beat all three in your circumstances, keep looking.
When is the right answer simply not to sell?
When the death benefit is under roughly $100,000, when someone still depends on the coverage, when you are healthy and under 70, when the offer barely exceeds cash surrender value, when you receive needs-based benefits a lump sum could interrupt, or when the policy is still inside its contestability period.
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Related Reading
- Life Settlement Questions To Ask Before Signing
- What Is An Accelerated Death Benefit Rider
- Upfront Fee Demand Scam
- Verify Provider License State
- Life Settlement Commission Disclosure
- How To Compare Two Life Settlement Offers
- Working With Your Own Advisor
- When A Life Settlement Is A Bad Idea
- Life Settlement Rescission Period Explained
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.