Montage Financial Group

California Life Settlement Provider

For Potential Sellers

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 the link here: https://www.lisa.org/about/new-york-public-awareness/.

What Is A Life Settlement?

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 the policy in force throughout the life of the insured. Life settlements are similar to a negative-coupon long bond, with 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).

Why Do People Sell Their Insurance Policy?

There are a variety of reasons people may seek to sell their life insurance policy. For example:

  • Premiums may have become unaffordable and the policy is in danger of lapse;
  • Estate-planning needs of the insured may have changed significantly;
  • Funds might be needed for long-term health care;
  • When the designated beneficiary has changed because of death or divorce;
  • As a business decision in the disposal of unneeded business-owned insurance, such as “key-man” insurance;
  • To satisfy the need for cash in a forced liquidation due to bankruptcy or other financial difficulties;
  • As a liquidation of policies donated to not-for-profits;
  • As a way to dispose of policies that are no longer needed or wanted.

How Does The Seller Benefit?

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, which could be several times the surrender value offered by the insurance carrier, 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 policyholder 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.

How Does An Insured Find Out How Much Their Policy Is Worth?

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.

Who Is Investing In Life Settlements?

Life settlements interests both private and institutional investors:

  • Retail Funds (in the UK, Germany, Latin America, and Asia)
  • Insurance Companies
  • Hedge Funds
  • Pension Funds
  • Banks

Why Consider This As An Investment?

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 the death of the insured.

What Makes This Opportunity Exist?

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.

What Constitutes A Qualifying Policy?

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 this range are considered). To meet prerequisites for policy selection, the policyholder must:

  • be able to provide evidence of mental competency, and voluntary and knowing consent to sell the life insurance instrument;
  • be willing and able to provide all necessary documentation required by the assessing company;
  • be a resident of and residing in the United States of America;
  • not be subject to any receivership, insolvency, domestic relations or divorce proceedings, or bankruptcy proceedings; and
  • not be an employee of the Montage Financial Group.
  • *Policy shall be in force for at least two years.

What Is AIM?

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:
    1. 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.
    2. 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.
    3. 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.
  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.

For Policy Owners

What Is A Life Settlement?

A life settlement provides a cash payment to an insurance policy owner in exchange for their policy ownership and beneficiary rights. It is the sale of a life insurance policy to a third party; an investor. Some states utilize the term viatical settlement interchangeably with life settlement, while other states only utilize the term viatical settlement when only when referencing a settlement involving a person with a chronic illness, being unable to perform at least two activities, or a terminal illness, which is generally expected to result in death in twenty-four months or less. When the owner of the life insurance policy sells the policy, they gain a cash benefit in excess of the policy’s surrender value, but which is less than its face value or death benefit. As a life settlement provider, Montage Financial Group facilitates the sales process, bringing the investors and the policy sellers and/or their representatives together in the marketplace.

Who Might Be A Candidate For A Life Settlement?

  • An ideal candidate is usually 65 or older. If the insured is younger than 65, then the insured likely has a serious or life-impacting medical condition.
  • A policy owner whose premium payments have risen to levels they can no longer afford and the policy is in danger of lapse, or they are considering surrendering the policy.
  • A policy owner whose estate planning needs have changed.
  • A policy owner who is considering selling a policy to fund long‐term care.
  • A policy owner who wants to enter into a new, better-performing insurance contract and can use the settlement payment to help fund the new policy.
  • A policy owner who, due to divorce, death of a spouse or other primary beneficiary, business dissolution, or company retirement, may no longer want or need their coverage.

Additional Facts About Life Settlements

  • After a policy owner settles their policy, they would no longer be responsible for the premium payments. Upon settlement, the third party investor would maintain the premiums.
  • The purchaser or third party investor will receive the insurance benefit proceeds upon the insured’s death.

In Addition To Montage Financial Group, Where Can Policy Owners Learn More About Life Settlements?

  • Life Insurance Settlement Association — LISA is an association dedicated to consumer protection, education, awareness and bringing licensed life settlement industry professionals together.
  • Visit your local state Department of Insurance website to see if they offer information or guidelines concerning life settlements in your state.

What Are Some Ways That Policy Owners May use Proceeds From A Life Settlement?

  • Supplement retirement income
  • Investments
  • To purchase long-term care insurance or fund immediate long-term care needs
  • Create capital for new business opportunities
  • Payoff debt
  • Provide educational funds for children or grandchildren or other charitable giving
  • Pay for medical bills
  • Anything! Remodel the kitchen, take a cruise

What Type Of Life Insurance Policies Typically Qualify For A Life Settlement?

  • Universal Life
  • Term
  • Survivorship, either Second‐to‐die OR First‐to‐die
  • Whole Life
  • Permanent Life
  • Group Life

What Is The Process To Obtain A Life Settlement Offer?

The owner of the policy and/or the insured complete an application, which includes an authorization to obtain medical and life insurance policy information, which may continue as long as the policy is in force after the policy is sold, as well as some disclosures, which may be specific to your state. After Montage and/or your Broker or Financial Representative have assembled the required data, we will review to try and determine if the policy has value.

Interested in learning more? Call us at (949) 537-2225 or email us at info@montagegroup.com.