This month's topic deals with life insurance, specifically, the accelerated death benefits feature available in both basic and supplemental life insurance. A morbid article, perhaps, but important to know as it relates to coverage you may already have.

Life Insurance

Through the Trust, you could have basic life insurance or supplemental life insurance, or both.

• If you've been with the State for at least a solid year of employment, you receive basic life.
• If you elected supplemental life insurance when you were first hired or at an open enrollment, you've got this coverage (for you and/or your dependents).
• If you're not sure if you have coverage, or how much coverage you have, call Prudential at 800-778-3827.

Whether you have basic or supplemental life insurance, your policy includes an accelerated death benefit feature.

You may apply for this benefit if you:

• have been diagnosed with a terminal illness and
• have less than 12 months to live, according to the diagnosis.

If you meet the criteria above, you may take a cash advance on part of your total life insurance benefit. For each policy you have with the Trust, you may request up to 50% of the total policy amount, up to the $75,000 cap. So, when you combine both policies' advances together, your total accelerated death benefit will not exceed $150,000.

An Example

Mary is 57, diagnosed with final stage cancer, and her doctors give her 4 months to live. Mary has both supplemental life ($50,000) and basic life insurance ($42, 000) through the Trust. If Mary requests accelerated death benefits, she can receive up to $46,000 (half of each policy). .

A note: This amount will be subtracted from the death benefit the beneficiary receives.

Some good news

The Trust eliminated a policy provision December 1, 1998, that reduced basic life benefits for members when they reached ages 65 and 70. As such, basic life insurance benefits remain equal to your Basic Annual Earnings (rounded to the next higher thousand) up to a $150,000 maximum. So even if you're not eligible for accelerated death benefits, your total life insurance benefit is higher than it's ever been before.

If you don't meet the accelerated death benefits requirements exactly, and are examining other options available, we urge caution. For instance, if you're considering a viatical settlement, you should know that viatical companies are not regulated in the State of Ohio. (A viatical agreement surrenders your rights to the policy as you sell the ownership of your policy to another person, who becomes both the owner and beneficiary of the policy.)

Viatical companies have been increasing over the past two decades, and buying policies from persons with such terminal illnesses as AIDS.

Also, you should know that while you can sign over your basic life policy or your supplemental life benefit, these plans are group life policies. As a "group life policy," you are also issued certificates, not policies, and this may cause some difficulty with the viatical companies. Also, as these are group policies based on you actively being employed by the State (and meeting other eligibility criteria), you may run into difficulty and be liable for either premiums or forced to sign potential liens against your estate if you are no longer an eligible State employee actively at work. So, while selling your policy is possible under our coverage, we urge you to examine all details of any contract you sign very carefully.

You may also wish to review the materials on the State of Ohio's Department of Insurance web site before you irrevocably assign your policy and all its rights to someone else (like a viatical company). The Dept. of Insurance also collects complaints on claims and investigates as necessary, but does not regulate viatical companies' deals so you may have limited or no recourse; an attorney can tell you more.

Viatical Settlements

A stranger cannot take out an insurance policy on your life as they have no insurable interest. However, life insurance is like any good/product you own: You can sell what you own, and if you buy a policy on your own life, you can sell it to anybody, even a stranger without an insurable interest. That stranger becomes the policy holder and has all the rights you had, including the right to name a beneficiary: He can name himself as the beneficiary on your former policy.

The "stranger" we're discussing is not a person, but a viatical firm. As mentioned before, viatical firms buy life insurance policies from those insured who have AIDS or other terminal illnesses and sell those policies to investors.

An Example

Norbert's doctor tells him he has six months to live due to a terminal illness, and Norbert knows that he needs money, and lots of it, to cover his anticipated medical expenses over the next six months. His savings are depleted, and family members have helped as much as they can, so in his desperation, Norbert thinks of his $100,000 life insurance policy bought from a local insurance agent which he hasn't tapped into yet.

A viatical firm offers Norbert half the amount of his policy's value, $50,000, and when Norbert signs their contract, this company owns the policy. The viatical firm sells the $100,000 policy to investors for $70,000. The investors are given enough documentation to know that the named policy holder (Norbert) has a terminal illness, and must pay the premiums to the insurance agent until Norbert passes. The investors, as the policy owners, now name themselves as the beneficiaries. So, when Norbert dies, the return on the investment is $30,000 for the investors (and Norbert's named beneficiaries before he sold his rights get $0).

Remember, these deals are not regulated in the State of Ohio, and you should consider the other options available to you, or at least review the material the Department of Insurance has before making a very final decision. And, if you meet the Trust's criteria, you have other options available.