How many of you know that you can irrevocably assign your Federal Employees’ Group Life Insurance benefits to another person or persons or that you can cash in your FEGLI Basic insurance when you have been diagnosed as being terminally ill? Well, you can. However, if you elect one, you can’t elect the other.
With one exception, you can transfer ownership and control of your Basic, Standard Optional, and Additional Optional insurance to any individual(s), corporation or irrevocable trust. Here’s the exception. You can’t transfer ownership if a court has issued a decree of divorce, annulment or legal separation and specifically stated that your FEGLI benefits must be paid to someone else. Note: If you can make an irrevocable transfer, you won’t be able to cancel your life insurance or make any changes in your beneficiary.
There are plenty of companies willing to buy the insurance policies of people who are terminally ill. Obviously, viatical settlement companies won’t pay the face value of a policy. They’ll buy it at less than that. How much less depends on the life expectancy of the policy owner.
Fortunately, federal law provides that if you are terminally ill and have a life expectancy of nine months or less, you may elect what is called a “living benefit.” It’s an accelerated payment of your Basic life insurance benefits to you, rather than to a beneficiary or survivor.
The government’s living benefit provision differs from the private sector viatical settlements in three important ways. First, only Basic insurance can be cashed in. Second, viatical settlements may be made with individuals whose life expectancy is greater than nine months. Third, there is no profit margin included in a living benefit; therefore, the amount you receive will usually be higher than that offered by a viatical settlement firm.
A living benefit may be elected only once, and that election can’ be reversed. So, it’s important that you understand what the options are. If you elect a full living benefit, you’ll be cashing in your entire Basic policy and you wouldn’t have to pay any more premiums. On the other hand, if you elect a partial living benefit, you’ll only be cashing in a portion of your policy, which can be done in multiples of $1,000. In that case, your premiums would be reduced. Note: Retirees and compensationers may only elect full living benefits.
Just remember, if you elect a full living benefit, your survivors won’t be eligible for any Basic insurance benefit. A partial benefit will provide them with the remaining cash value of your policy. Of course, the dollar value of the remaining amount will be frozen. It won’t change, even if your salary goes up.
Like viatical settlements, living benefits are based on the expectation that you will die sooner than later. But what if that doesn’t happen? If you are one of the lucky ones who elect a living benefit and don’t die on cue, I’ve got some good news for you. You won’t have to repay a penny of the money you received.