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Understanding your Life Insurance Settlement Options

Father and airman talking AAFMAA offers six settlement options for beneficiaries of life insurance policies. For all options (except lump sum) AAFMAA guarantees a specified interest rate. If AAFMAA’s net yield on assets (NYA) exceeds the guaranteed (which has traditionally been the case), the beneficiary receives the difference between the guaranteed and the actual return achieved. That amount is paid in the “bonus check” sent May 1st each year.

At the time of death of an insured, AAFMAA issues a Settlement Options Form to explain options and ensure AAFMAA’s actions are clearly disclosed and understood by the beneficiary.

Life Annuity

  • Amount is gender and age dependent – younger beneficiary, smaller monthly amount
  • Guaranteed minimum interest rate
  • Payments stop upon the beneficiary’s death
  • Not available for a trust
  • Once selected, this settlement option cannot be changed
  • Minimum net death benefit must be $10,000

Life Annuity 10, 15 or 20 Years Certain

  • Lifetime monthly payments with a minimum of 120 payments (10 years), 180 payments (15 years) or 240 payments (20 years)
  • Amount is gender and age dependent – younger beneficiary, smaller monthly amount
  • If the beneficiary dies before payments are complete, the remainder is paid to the beneficiary’s estate, unless otherwise specified
  • Not available for a trust
  • Once selected, this settlement option cannot be changed

Interest Only

  • Proceeds are left with AAFMAA
  • Monthly payment based upon a guaranteed annual interest yield
  • Withdraw funds up to twice per year, $5,000 minimum withdrawal
  • Upon the beneficiary’s death, the remainder is paid to the beneficiary’s estate, unless otherwise specified
  • Beneficiary may select another settlement option at any time

Lump Sum

  • Entire proceeds paid to the beneficiary at one time
  • Beneficiary is responsible for investing assets (AAFMAA Wealth Management & Trust can assist with this process. Terms and Conditions apply)
  • Beneficiary may elect partial lump sum payment and one of the above options on remainders of $10,000 or more
  • Full amount of the death benefit can be returned for any option provided that:
    • The check(s) are returned to AAFMAA within six (6) months of issue date, AND
    • Check(s) have not been cashed

For more information about AAFMAA’s Settlement Options, give our Beneficiary Assistance Team a call toll-free at 1-888-976-3712. For information about settlement options unique to Wealth Builder Life Insurance policy, please CLICK HERE.