Question 1

Why does CONNECT not provide a Market Value Calculator?

Accepted Answer

Without full knowledge of your medical condition and background and a review of policy conditions and premiums the calculations are little more than a guess intended to capture your attention.

Question 2

What is a life settlement?

Accepted Answer

Life settlement is the term given to describe a financial transaction in which a policyholdersells their life insurance policy to a third party – usually a financial institution or regulatedprovider – at a discount to its maturity value. The purchaser pays all remaining premiumsand receives the life insurance benefit when the policy matures. Investors are attracted to lifesettlements because they offer long-term growth potential that is generally not affected byinterest rate movements, volatility in the equity markets, global events or economic downturns.

Question 3

How do we quickly assess your Health?

Accepted Answer

Start by comparing your health to the health of others your age: 
Standard – My health is average compared to others my age.
Slightly Impaired – I have had very few health issues compared to others my age.
Moderately Impaired – I have chronic but manageable, health conditions that require ongoing treatment and care, but they do not have a significant impact on my quality of life relative to my peers.
Highly Impaired - I have chronic medical conditions that frequently impact my quality of life. 
Extremely Impaired – I have major or severe medical conditions that constantly affect my quality of life.
Terminal – I have irreversible medical conditions that will significantly reduce life expectancy, such as late-stage cancer.

Question 4

What risk is there of an insurance company going bankrupt?

Accepted Answer

An investor investing in policies will assume the credit risk associated with policies issued byvarious life insurance companies. The failure or bankruptcy of any such life insurance companycould have a material adverse impact on an investor’s returns. However, the risk of bankruptcyis low and to date, we know of no death benefit that has been unpaid as a result of thebankruptcy or financial difficulties of any U.S. life insurance carrier.

Question 5

Can insurance companies contest pay-outs on policies?

Accepted Answer

Life insurance policies typically have a contestability clause, which permits the issuing life insurance company to contest its obligation to pay a death benefit based upon any material misrepresentation or omission made by the applicant or the insured on the life insurance 
application within, generally, the first two (2) years of the policy issue date.

Life insurance companies may also contest policies based on a lack of insurable interest, which claim may 
survive the expiration of the two (2) year contestability period.

Question 6

Do some life insurance companies object to investment transactions involving life settlements?

Accepted Answer

Some U.S. life insurance companies have voiced concerns about the life settlement industry generally and the transfer of policies to investors. These life insurance companies may be averse to transferring or honouring a policy by third parties unrelated to the original insured/owner, especially when they may believe the initial premiums for such policies might have been financed, directly or indirectly, by the purchaser. Certain improperly originated policies are sometimes known as stranger-originated life insurance transactions or STOLI.

Question 7

Is there any threat of challenges by former beneficiaries or heirs of the insured?

Accepted Answer

Former beneficiaries or heirs of the policy may challenge the validity of the sale of the policyand consequently contest, obstruct or delay the payment of the proceeds of a policy followingan insured’s death, based on a variety of factors including a lack of insurable interest, mentalcapacity of the insured, applicable periods of contestability or suicide provisions.

Question 8

Is there an age limit on some policies?

Accepted Answer

Some insurance policies terminate if the insured lives to the age of 100, or in some cases atage 95. If the insured outlives the policy, an investor owning such a policy may get nothingon that policy as the insurer is relieved of its obligation. Such a policy termination wouldresult in a loss of investment return on the policy.

Question 9

Will policies pay out on euthanasia, war or terrorism?

Accepted Answer

Once a US policy has passed the non-contestability period (two years) it will pay out even in the event of suicide or euthanasia. However, most policies are not covered in the event of war or terrorism.

Question 10

How does the policy buying process work?

Accepted Answer

A life settlement policy transaction begins with a policy owner obtaining a health assessment, known as a life expectancy analysis (LE) report from an independent, third-party medical underwriter so that the EstimatedMaturity Date (EMD) can be calculated. Based upon health and medical information, anevaluation can be made, and life expectancy determined by that independent medicalunderwriting firm. Each policy is medically underwritten, and a life expectancy reportproduced. Subject to the criteria determined by the appointed provider the other conditions are satisfied, and a policy is purchased by the Escrow Agent, pursuant to a purchase agreement and otherancillary closing documents that transfers the legal ownership and beneficial interest in thepolicy to that Agent.

Question 11

What is the Estimated Maturity Date (EMD)

Accepted Answer

Estimated maturity dates (EMD) are based on life expectancy (LE) calculations. They provide an estimate of the expected time to the death of the insured.

Question 12

What should investors understand about the uncertainty of EMD?

Accepted Answer

The value of the policies life settlement market depends, among other things, upon the life expectancy of the insured. Life expectancies are estimates of the expected longevity or mortality of an insured and are inherently uncertain, especially in small sample sizes.

There can be no assurance that any life expectancy obtained on an insured for a policy will be predictive of the future longevity or mortality of the insured. The actual maturity date of the policies may therefore be longer than projected, which would negatively impact the time and therefore the return on investment. In addition, improvements in medicine, disease treatment, pharmaceuticals and other medical and health services may enable insurers to live longer. 
 
To the extent actuarial assumptions differ from actual results, as to life expectancy or other assumptions made in the pricing or valuing of policies, an investor may over-pay for a policy.

In addition, to the extent an investor obtains any policy based on the perceived life expectancy and such perception is inaccurate, distributions from the maturity of that policy may be delayed; in some cases, such delays could be significantly long. 
 
Current mortality tables are relied upon in part to forecast future cash flows in determining the prices paid to acquire policies. However, future mortality experiences may not resemble the mortality experiences of the past.

Question 13

How is the fixed return affected by the Estimated Maturity Date (EMD)?

Accepted Answer

Each policy pays a fixed return to the policy owner or beneficiary when the life insured dies. The calculation of the annual return will be the face value (sum assured payable at death) less the total cost including premiums and fees divided by the total cost and further divided by the number of years before EMD. 
 
Simply put, for example, a policy that costs $100k including premiums and fees with an EMD of 9 years whose face value of $190k pays out on EMD an absolute return of 10% per annum. $190k – $100k = 90k, divided by 9 years = $10k per year or 10% per annum absolute return. If the policy matures early the fixed return ($190k, in the example) remains the same but the annual return will increase. If the policy matures late the fixed return remains the same ($190k, in the example) but the annual return will decrease. Policies that mature much earlier than the EMD return a significantly higher payout to the investor. Life Settlement Connect prices policies to be profitable up to 150% of the EMD, even policies that mature well past the EMD may provide an attractive return. 
 
However, if the investor chooses to take over payment of premiums and fees and the policy runs beyond twice the EMD (e.g. if the LE report estimated that the insured would die on or before 40 months from EMD but actual maturity is more than 80 months after the EMD) then the original investment is at risk

Question 14

How are the policies valued?

Accepted Answer

The policy is valued by discounting the face value by the required annual return percentageto the EMD as detailed in the previous question.

Question 15

Is the principal protected?

Accepted Answer

Though the maturity value – the death benefit - will be paid and that amount is protected the investor’s principal is not. If premiums are not paid or need to be paid past EMD then the value of the investment can be eroded.

Question 16

Is it better to purchase a policy on an 80year old rather than a 65year old?

Accepted Answer

Not necessarily, in fact if they both have similar EMDs provided by the life expectancy providers there is a strong argument to prefer the younger life where premiums may  be lower and increase more slowly (see chart). There is also a likelihood that the 65year old will have lifestyle complications that the 80year old does not suffer.

Question 17

Does wealth make a difference?

Accepted Answer

Clearly the access to a higher level of medical care will be important, it could also be said that with medicine as it is today the wealthy can be kept alive far beyond expectations. It might also be that the lifestyle of the wealthy has historically been less impaired than that of the poorer insured.

Question 18

Given the above why might policies with high maturity value have a less reliable EMD?

Accepted Answer

Answers to the two preceding questions provide this answer also.

Question 19

Why have death benefits always been paid despite the closure of some Carriers?

Accepted Answer

One reason may be that premium income is extremely valuable given the front-end cost of new policies and means that carriers are prepared to take on existing life insurance from another, failing, carrier.

Question 20

What happens if CONNECT goes into liquidation, closes or is sold?

Accepted Answer

CONNECT has no interest in any policy and acts purely as an automated collector of the information needed to sell the policy through a licensed provider.

Question 21

Who is responsible for paying the future premiums and fees on the policy?

Accepted Answer

The policy owner.

Question 22

Why might someone sell their policy?

Accepted Answer

There are many reasons why the insured would want to sell a policy: 
• The policy may no longer be needed or wanted 
• Premium payments may have become unaffordable 
• They could be considering lapse or surrender of the policy 
• There may have been a change in estate planning needs 
• The beneficiary for whom the policy was originally purchased is now deceased or no 
longer has a need for the policy. 
• The policyholder requires funds to pay for medical expenses or for new or experimental 
treatments for themselves or someone close to them 
• The sale of the policy would allow the policyholder to maintain a desired standard of 
living and live out his/her final years with dignity.

Question 23

What are the tax implications for the investor when the policy matures?

Accepted Answer

Policy proceeds may be subject to tax. Investors should seek independent professional advice on their individual tax and legal circumstances.

Question 24

Who is eligible for a life settlement?

Accepted Answer

Typically, individuals aged 70 or older with a life insurance policy worth $100,000 or more are eligible for a life settlement.

Question 25

What are the benefits of a life settlement?

Accepted Answer

A life settlement provides immediate cash that can be used for various financial needs, offering an alternative to lapsing or surrendering a policy.

Question 26

Are life settlements regulated?

Accepted Answer

Yes, life settlements are regulated by state laws in most U.S. states to protect consumers.

Question 27

How can a life settlement improve a policyholder's financial situation?

Accepted Answer

A life settlement can offer liquidity for unneeded or unaffordable policies, allowing access to cash for other financial goals.

Question 28

Can a life settlement help with retirement planning?

Accepted Answer

Yes, a life settlement can provide funds that enhance retirement savings or reduce financial burdens during retirement.

Question 29

How does a life settlement affect estate planning?

Accepted Answer

A life settlement can impact estate planning by providing liquidity, but it may also reduce the death benefit available to heirs.

Question 30

How can life settlements be used to cover long-term care costs?

Accepted Answer

The proceeds from a life settlement can be used to pay for long-term care, helping to manage healthcare costs in later years.

Question 31

How does Life Settlement Connect assist life insurance agents?

Accepted Answer

Life Settlement Connect provides agents with resources, training, and support to help their clients explore life settlement options.

Question 32

What marketing strategies does Life Settlement Connect employ?

Accepted Answer

Life Settlement Connect uses targeted digital marketing, educational content, and direct outreach to connect with potential clients and partners.

Question 33

How can financial advisors benefit from working with Life Settlement Connect?

Accepted Answer

Financial advisors can expand their services by offering life settlement options to clients, potentially increasing client satisfaction and retention.

Question 34

What is the process for referring a client to Life Settlement Connect?

Accepted Answer

The process involves submitting client information through a secure platform, after which Life Settlement Connect evaluates and assists in the life settlement process.

Question 35

What marketing materials does Life Settlement Connect provide to illustrate the benefits of life settlements?

Accepted Answer

Life Settlement Connect offers brochures, presentations, and case studies that help explain the advantages of life settlements to clients.

Question 36

Positioning Life Settlement Connect's services in the marketplace

Accepted Answer

Life Settlement Connect positions itself as a trusted partner for financial professionals, offering expertise and support in navigating the life settlement market.