Why are there restrictions on the self-financing Option 2?
Because the self financing option is expensive to administer, there must be a minimum number of investors who are willing to self-finance the policy in order for the option to be feasible. If Option 1 is approved, Option 2 may be used for a particular policy if investors with interests representing at least 40% of the face value of the policy have expressed interest in Option 2. For example, assume the face value of the policy is $100,000 and there five investors with equal 20% interests. If Option 1 is approved and two of these investors have expressed interest in Option 2, those investors will be allowed to self finance the premiums. If only one investor expresses interest in Option 2, there will be no self-financing Option implemented with respect to that policy.
