There are two aspects of the Federal Employees Group Life Insurance (FEGLI) program that are not well recognized or understood but which might be advantageous to you in certain circumstances.
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First, you can definitively assign the benefits of your life insurance policy to another individual or individuals. Second, if a doctor has told you that you have a terminal illness, you are eligible to collect on your basic insurance policy. However, the law makes it such that you cannot choose both paths. If you choose one, you will not be able to select the other.
The Assignment of Benefits
You can transfer ownership and control of the property to any person or persons, organization, or irrevocable trust that you choose. If you execute an irrevocable transfer, you will lose the ability to cancel your life insurance policy or make any changes to the person who would be the beneficiary of your policy.
Living Benefits – Anyone who is diagnosed with a terminal illness and has a life expectancy of nine months or less is eligible to apply for what is known as a living benefit. It is an early payout of essential life insurance benefits made directly to the policyholder, as opposed to a beneficiary or survivor of the policyholder’s policy. It is only possible to cash in on basic insurance.
Once chosen, a living benefit can’t be modified. If you accept the whole living benefit, you’ll forfeit your basic coverage. If you pick a partial living benefit, you’ll receive a percentage of the insurance payment. Multiples of $1,000 are acceptable. Complete living benefit eliminates premium payments. Partial benefits would cut your rates. Retirees and those who want compensation may select full living benefits.
Once you pick a full living benefit, your survivors won’t be entitled to a bare insurance payout if you die. After a partial settlement, they’ll pay the remaining sum. The monetary value of the remaining balance will remain stable. It won’t change if your pay rises.
If you are qualified to receive a FEGLI living benefit, the amount you are awarded will be less than that of your insurance. This decrease reflects the interest the life insurance fund will no longer get because they paid you ahead of schedule. Because, fortunately, there is no profit margin involved in a living benefit, the amount you get will typically be more than that supplied by a company that deals in viatical settlements.
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