Montage Financial Group, Inc. would like to invite anyone considering a life settlement in the state of New York to visit the consumer public awareness link presented by the Life Insurance Settlement Association at http://www.lisa.org/industry-resources/new-york-public-awareness
A Life Settlement provides a lump sum cash payment to an insurance policy-holder in exchange for contract ownership rights. The Acquisition cost is based on a fraction of the policy’s face value and exceeds the policy’s surrender value available to the policy owner. The new owner assumes responsibility for payments to keep policy in force throughout the life of the insured. Life Settlements are similar to a negative-coupon long bond, with an indefinite maturity.
Life insurance policies are generally purchased from individuals who are over the age of 65 and have remaining life expectancies between four and twelve years (although in some cases, life expectancies outside this range will be considered).
There are a variety of reasons people may seek to sell their life insurance policy. For example:
Life Settlements are one of several life insurance practices, that make it possible to realize profits through innovative actuarial analyses and careful assessment of mortality and other risks.
The emerged sales of Life Settlement policies have created a secondary marketplace for existing life insurance policies. The buyer of the policy becomes the policy’s owner and beneficiary, as well as a payer of future premiums. The buyer, having taken over payments of the premiums, collects full proceeds of the life insurance policy upon death of the insured.
The percentage of the policy’s face value that is provided to the seller is based upon sophisticated underwriting models that allow the purchase of policies from individuals who are not terminally ill, yet may typically provide them a cash payout ranging from 15% to 50%, depending upon the life expectancy, health history, and premium obligation the buyer will assume over the life expectancy of the insured.
For the insured, Life Settlements help address a variety of financial planning concerns – from meeting estate tax needs to protecting against various individual and business risks. When circumstances change, policyholders may not be able, wish, or need to continue paying premiums to maintain their policies. Changes of circumstances arise from events, such as retirement, health problems, divorce, fluctuation in estate size, and the sale of a business or it may be that the policy holder wishes to use the money to make other investments. When these events occur, the option of a Life Settlement contract should be evaluated. It is possible that the policy owner’s present-day objectives can better be accomplished by selling the policy.
Unlike a life insurance application, no medical examination is required. The Insured would simply complete an application that provides information on the life insurance policy, and provide the most recent medical records along with a current HIPAA release form. The Insured can contact Montage Financial Group for suggestions on how to find a broker that can assist through this process.
Life Settlements interests both private and institutional investors:
Assume that a policyholder buys a whole-life policy at age 40. The buildup of policy value is based on the assumption that the policyholder’s health follows a normal pattern as he ages. If the policyholder’s health suddenly deteriorates at age 65, the actuarial value of the policy will be much higher than for a 65-year-old in normal health. Life insurance carriers do not offer health-adjusted surrender values because pricing difficulties outweigh the benefits they might obtain by offering them to customers. This market inefficiency has created a lucrative “sweet spot” of opportunity to purchase impaired policies. As a result, policy owners who desire to sell their life insurance contracts, provide buyers the opportunity to obtain returns on investment.
Montage Financial Group facilitates the purchase of Life Settlement policies of individuals who are over the age of 65 and have remaining life expectancies of between four and twelve years (although in some cases life expectancies outside of this range are considered). To meet prerequisites for policy selection, the policyholder must:
Montage Financial Group employs a four-phase proprietary Acquisition of Insurance Methodology (AIM) to effectively and efficiently obtain and manage Life Settlement policies. This methodology includes extensive computer-assisted administrative and client information database functions based upon bifurcated medical evaluation techniques that blend medical information with actuarial data. Policies and processes applied within AIM can be summarized in the following workflow:
1. Origination. Associated brokers and agents submit potential policies for review and analysis. This is a preliminary function that allows an initial review of available product.
2. Evaluation. An actuarial analysis is conducted to verify that the candidate meets Life Expectancy (LE) requirements and that the policy is within the guidelines established by Montage Financial Group. It is performed in three functional areas:
a. Medical: Medical records of the insured are requested. They are forwarded to evaluating agencies and medical professionals who provide medical evaluation and morbidity assessments, usually within two to five working days. These reports are reviewed and may be subject to further discussion with consulting physicians.
b. Insurance: During the same period, Verification of Coverage is conducted to ensure that the policy meets all necessary criteria. From this, the Cost of Insurance (COI) is determined.
c. Financial: A proprietary valuation pro forma model is used to ascertain the asset value of the instrument for the portfolio, as well as to determine projected costs and the rate of return. The model components and variables include: (i) amount of death benefit (i.e., the policy face amount); (ii) nominal maintenance fees to be charged; (iii) an acquisition fee generally equal to 1% of the policy face amount; (iv) insurance premiums to be paid over the expected life of the insured; and (v) documented life expectancy (LE).
3. Acquisition. Qualifying policies enter into a bid process for acquisition. All submissions that have not been approved are archived in accordance with applicable HIPAA requirements and the management’s needs of Montage Financial Group.
4. Management. Policies that have been obtained are placed in a portfolio to be ultimately maintained to maturity by the Management Company. This strategy does not allow any one single Life Settlement policy to have more importance than another.