Magna Life Settlements

Websites

Life Settlements

Life Insurance Settlement Association
www.lisa.org

The Institutional Life Markets Association, Inc.
www.lifemarketsassociation.org

Insurance

National Association of Insurance and Financial Advisors (NAIFA)
www.naifa.org

National Association of Independent Life Brokerage Agencies (NAILBA)
www.nailba.org

Escrow Agents

Mills Potozcak and Company
www.mpccpa.com

Well Fargo Escow Services
www.wellsfargo.com

Bank of Utah Corporate Trust
www.bankofutah.com

Medical References

Risk and Insurance Management Society, Inc.
www.rims.org

The American Academy of Insurance Medicine
www.aaimedicine.org

Regulators

National Association of Insurance and Financial Advisors (NAIFA)
www.naifa.org

Frequently Asked Questions

Q: What is a life settlement?

A: In a “life settlement” transaction, a life insurance policy owner sells his or her policy to an investor in exchange for a lump sum payment. The amount of the payment from the investor to the policy owner is generally less than the death benefit on the policy, but more than its cash surrender value. The dollar amount offered by the investor usually takes into account the insured’s life expectancy (age and health) and the terms and conditions of the insurance policy.

Q: Why would a policy owner wish to sell a life insurance policy?

A: Due to changes in family circumstances, a life insurance policy owner may no longer need the insurance provided by the policy. A spouse may have died, children may have grown up, or a company with life insurance on a key officer may have been sold or gone out of business. Other policy owners may have difficulty making premium payments or simply need cash. In such circumstances, many policy owners surrender their policies or let their policies lapse by ceasing to make premium payments. Selling a policy to an investor may be another alternative. Such sales may be made through life settlement brokers who charge commissions.

Q: How does a life settlement take place and who are the parties involved?

A: A policy owner may discuss a possible settlement with his or her insurance agent or financial adviser, who then contacts a life settlement broker. In some cases, the policy owner may be solicited directly by a life settlement broker. Life settlement brokers may also be life insurance agents or securities brokers. Depending on the requirements of the states in which they do business, life settlement brokers may be licensed.

The life settlement broker obtains the insured’s authorization to release medical records and forwards the policy owner’s application and medical information to one or more companies known as life settlement providers. Many, but not all, states regulate life settlement providers, who also charge a commission.

The life settlement provider obtains life expectancy estimates on the insured and bids on the application. Life expectancy underwriters (who are not the insured’s personal physician) evaluate the risk of mortality of the insured based on his or her personal characteristics. If the life settlement provider’s bid is accepted, the provider may add that policy to a large group of policies, interests in which may be offered to investors. Institutional investors analyze the information provided by the life settlement provider, often obtaining their own life expectancy estimates. Retail investors, on the other hand, may have to rely on life settlement personnel or other investment professionals to assess the advantages and disadvantages of the transaction. In either case, the investor makes a cash payment to the policy owner or policy owners and continues to pay premiums necessary to keep the policy or policies in effect. Upon the insured’s death, the investor receives the death benefit.

Q: Is a Life Settlement an option for me?

A: Possibly. Consult your Life Settlement representative to see if this is a real solution for you.

Q: How long does it take to settle a policy?

A: Most Life Settlement transactions take from 4 to 6 months to complete from the time the decision is made to the receipt of payment.

Q: Are there any fees or cost involved in a Life Settlement?

A: Yes. The costs associated with the sale of a policy are included in the purchase offer. A fee, commission, or other form of compensation is paid to the seller representative for consultation, the cost obtaining medical records, life expectancy reports, among other requirements.

Q: How much is my policy worth?

A: The main components determining the value of a life insurance policy:

• The age and medical condition of the insured
• Type of life insurance policy (e.g., universal life, whole life, term)
• Amount of the death benefit
• Amount of premiums necessary to keep the policy in force
• Other factors will also weigh in this determination, such as the rating of the issuing insurance company and general market supply and demand

Q: What happens to my life insurance policy after I enter into a Life Settlement contract?

A: The ownership rights and obligations under the policy are transferred to the new owner and a new beneficiary.

Q: What happens to my medical information?

A: All medical information is secured in an encrypted database.

Q: Are the proceeds of Life Settlements taxable?

A: Life Settlement proceeds may be taxable. You should consult your tax advisor for additional information.