Group Universal Life Insurance As A Retirement Planning Device

While it is not advertised as such, group universal life insurance is often used as a retirement planning device. It offers many advantages to employers and their employees because the premiums are tax deferred, reducing the taxable income of the employee and making the employer benefit package appear more robust.

Key Features of Group Universal Life

  • Flexibility. Group universal life offers affordable flexibility. Employees can choose coverage in increments, typically of $50,000, or the coverage can be based on the employee's salary. This is often the choice if the universal life coverage is paid by the employer. In employee-paid plans, the insurance offers flexibility to employees by allowing them to adjust their premiums without having to develop a new policy.
  • Portability. One of the main advantages of group universal life is that if your employee is laid off, quits, or stops working, he or she can continue the coverage without any break. As long s the employee continues to pay the premium, the life insurance coverage will continue.
  • Living Benefit Option. Many group universal life policies offer a "living benefit" for insureds who become disabled or terminally ill, allowing them to access the cash value of the benefit before death. This early access may or may not be subject to additional tax.
  • Tax-Deferred Premiums. Because payments for group universal life are tax deferred, employees often find it an attractive option for decreasing their tax burden. In most cases, if the policy is allowed to mature and is paid out as a death benefit, no tax must be paid on the cash value of the policy.
Employer Benefits
  • By offering group universal life, you can increase the value of your benefits package without increasing your operating costs.
  • You can recruit better prospects to join your company when you offer a complete array of benefits, including universal life coverage.
Advantages to Employees
  • The ease of being able to opt into life insurance through an employer increases the likelihood that employees will choose coverage.
  • When they enroll within a specified period of time, employees are not required to undergo medical exams or complete lengthy application forms.
  • In many cases, the cash value of the group life insurance policy can be tapped into without incurring tax penalties.
As with any form of insurance, most group life policies contain exclusions to protect the insurer. Exclusions may include suicide or certain health complications. Be sure to discuss potential exclusions with your insurance representative.

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