Charity Begins At Home, Not At The Carrier

Charity Begins At Home, Not At The Carrier

Director Francis Ford Coppola leaves us with a cold and calculating Michael Corleone looking out the windows of his lake house over the water that would prove to be the River Styx for his brother.  What is to be a day of relaxation and fishing for Fredo will end in the fulfillment of Michael’s directive for the execution of a sibling who he deems unfaithful to him and the family.

In audience time it is 16 years before we meet the Don again in the opening scene of The Godfather: Part III.  In contrast to the sordid power-brokering that goes on in the initial wedding and baptism sequences of the first two films, we find an older, reflective Michael on a path for respectability, legitimacy and eventually some sort of moral absolution.

In a grand ceremony at St. Patrick’s Cathedral he is being inducted as a Commander in the Order of St. Sebastian and viewers soon learn that there is probably a connection between that honor and a $100 million gift to the Church from the Vito Corleone Foundation, a charity run by Michael’s daughter.

The film only serves to fuel the suspicion we often have of those who seem too charitably minded; a suspicion that is understandably shared by insurance carriers.

Back in the olden times as states began passing laws giving charities an insurable interest in the lives of donors, it wasn’t much trouble getting a significant amount of charity-owned coverage on the life of a person who intended to donate the premiums each year to the organization.

The problem arose when an invigorated life settlement marketplace created an attractive non-correlated asset class and groups of independent investors arranged for charities to buy coverage on donors paying the premiums and anticipating returns for all involved when the policy was sold later on in the secondary market.

Once everybody figured out what was going on a couple things occurred

First, applications began containing questions addressing intended use of coverage, particularly regarding possible transfer of interests in the contract after the sale.  And, second, the liberality of financial underwriting for charitably-owned coverage was dramatically proscribed.

A recent survey we conducted of major carriers revealed that the starting point, and often the finish line, for the amount of death benefit they would entertain was only ten times the annual donation pattern the insured had with the charity; i.e. if Benjamin Bear has been giving $5,000 a year to the Bruin Varsity Club, he is only good for $50,000 coverage to leverage his legacy – hardly a gold mine for some insurance advisor alumni trolling the membership list.

One carrier would allow twenty times.  Another permitted the projected value of the pattern of giving for 75% of the donor’s life expectancy.

The fields are hardly white for harvest if an insurance advisor intends to get rich selling charitable-owned coverage.  Nonetheless, there are circumstances where carriers may look beyond the donation-multiple standard.

By the way, both The Godfather and The Godfather: Part II won the Academy Award for Best Picture.  The Godfather: Part III was nominated, but denied, the award going instead to the Kevin Cosner film Dances with Wolves.  The American Film Institute ranks The Godfather #2 among the best motion pictures in American cinema, second only to Citizen Kane.  Also, UCLA has won more NCAA championships than any other school.  You can look it up!