Group Universal Life Policy: Meaning, Pros and Cons, FAQs

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Updated September 12, 2023

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What Is a Group Universal Life Policy?

A group universal life policy is a form of universal life insurance offered to a group of people at a lower cost than what is typically offered to an individual. Group universal 澳洲幸运5官方开奖结果体彩网:life insurance is commonly purchased by corporations that want to provide their employees wiꦉth life insuranc𒆙e coverage. These policies provide each insured party with permanent insurance coverage with an option to grow their savings.

Key Takeaways

A group universal life policy is universal life insurance offered to a group of people at a lower cost than what is typically offered to an individual.
Employers may cover the entire cost of coverage or split premiums with employees through regular pre-tax payroll deductions.
These policies also come with a savings component, allowing cash to accumulate in a guaranteed account with a fixed interest rate.
Employees can choose to make withdrawals at any time without any tax penalties or leave the cash to accumulate.

How Group Universal Life Policies Work

Many businesses feature group universal life insurance as part of their 澳洲幸运5官方开奖结果体彩网:employee benefits package. In some cases, coverage may be extended to spouses and other immediate family members of employees as well. Like other policies, group universal life insurance pays a 澳洲幸运5官方开奖结果体彩网:death benefit to the insured party's beneficiaries but also features a savings component—two distinctly different financial benefits.

Policyholders choose coverage that starts with the amount of their base salary. From there, the amount of coverage depends on the individual's financial situation and the needs of their 澳洲幸运5官方开奖结果体彩网:beneficiaries. For instance, someone who earns $50,000 per year may choose a coverage option of $150,000—three times their salary—based on their current situation. This amount is paid to their beneficiaries upon their death as long as the premiums are paid.

Employers may cover the cost of the premiums in their entirety, while others split the cost of coverage with their employees through pre-tax 澳洲幸运5官方开奖结果体彩网:payroll deductions. The cost of coverage is much less than paying for an individual policy. It's akin to buying food items in bulk. The cost to cover each individual is much cheaper because the policy is designed to cover a large group, just as 澳洲幸运5官方开奖结果体彩网:purchasing a large amount of a particular grocery item is cheaper on a per-item basis than buying each item separately.😼

Policies generally accumulate cash value after about a year—an amount that increases every year thereafter. These sums are relegated to a guaranteed account, earning the policyholder a minimum fixed interest rate. Cash value is available for 澳洲幸运5官方开奖结果体彩网:withdrawal at any time, at any age— usually without tax penalties. Policyholders may choose to leave the savings in the policy and allow the cash value to grow. Employees can start, change, or stop additional premiums at any time, without charge. Policyholders also get the convenience of making contributions via payroll deductions, or they may contribute any lump sum in addition to their premiums.

Important

Cash v෴alues generally accu♋mulate after a year, grow at a fixed rate, and can be accessed tax-free at any time.

Special Considerations

A group universal life policy does not receive dividends. Some other types of life insurance may pay dividends. The amount of a dividend is set by a company’s 澳洲幸运5官方开奖结果体彩网:board of directors each year and is not guaranteed. When a dividend is payable, a policyholder can take it in cash or use it to purchase more insurance. They may also be used to pay or reduce premiums. Earned dividends usually tend to fluctuate from year to year. If you are someone who would like to earn dividends, it's important to review other 澳洲幸运5官方开奖结果体彩网:types of life insurance policies.

Advantages and Disadvantages oಌf a Group Universal Life Policy

Life insurance can be expensive and may have many different requirements. Taking group coverage through your employer can be cheaper than taking out an individual policy on your own. You may also be able to get guaranteed coverage without having to answer too many medical questions.

Some employers alဣso provide some other benefits with the🀅se policies:

Portable coverage: This allows you to continue coverage even when you change jobs or retire.
澳洲幸运5官方开奖结果体彩网:Accelerated benefits: This type of coverage is extended to anyone diagnosed with a terminal illness
澳洲幸运5官方开奖结果体彩网:Waiver of premium: You may not have to pay a premium if you become totally disabled.

There are also some distinct disadvantages to group coverage. First, if you don't have portable coverage, you will lose your policy if and when you leave or lose your job. Secondly, because the policy is provided through your employer, you may not be able to get as much coverage as you want and/or need. Keep in mind, if you want to increase the amount of coverage, you're probably going to have to pay more and you'll likely have to take a medical exam.

How do I get group universal life insurance?

This form of permanent life insurance is typically offered by an employer as a benefit to employees. One of the biggest advaꦜntages is that the cost is much lower for the customer than if they had purchased the p🍃olicy on their own.

What are some other benefits?

These policies come with ✅a cash-savings benefit that earns 🏅the policyholder a minimum fixed interest rate. They may be portable, permitting the owner to keep the policy if they change jobs or retire.

Do group universal life insurance policies have any disadvantages?

The policy is canceled when you leave or lose your job, unless you have a portability option. Another thing is that since your employer is offering the policy, you may not be able to get as much coverage as you want or need. If you want to increase coverage, you're probably going to have to pay more and get a medical exam.

Correction—Sept. 15, 2023: This article has been corrected to state that dividends are not paid out on group universal life insurance policies.

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Prudential Group Insurance. “.” Pages 3-5.
Western & Southern Financial Group. “”
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