Syndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale Arizona
Video Transcript: What is group life insurance? In many businesses, some of the employer benefit packages include universal life, and that's in a group scenario. It's going to look . . . generally, that's going to be priced at simplified issues, sometimes even guaranteed issue. The cool thing about universal life as a permanent form of life insurance, it can accumulate cash value and you could use it as a supplemental retirement plan or use if for its coverage benefit. When you're looking at group, instead of just term insurance which is traditionally group cases, many people are now looking at permanent forms of life insurance, this one being universal life, as part of a group benefit package.
When you look at this, this is a pretty good idea because you're going to have to pay up a little bit of economic tax on this, about $50,000 of death benefit, because you're really gaining a benefit. To me, that's pretty worth it because wherever you have to pay a little bit in taxation for the benefit, you're not really putting this out on your hand. Depending upon if your employer is paying it or depending upon if you're paying it, it really is still a pretty good idea. You have permanent coverage based on all these lives on a group case and you have a little bit of cash value accumulating in this. It's great for supplemental retirement income. You can look at universal life as a double-edge; a way of protecting assets, protecting your life, as well as having some income later on.
Group life insurance is life insurance provided through your place of employment. Your employer might pay the premium, or you might pay the premium, or a combination of the two. Life insurance is subject to ERISA and there are tax consequences for amounts beyond $50,000. Sometimes you can take the policy with you (it is portable), and sometimes your life insurance ends when your employment ends. It is a good idea to have a privately owned policy in addition to group life insurance, as you never know if you will be able to qualify for one in the future.
Group life insurance is a master policy held by an employer for all employees who receive a certificate of insurance by being employed for a company. Usually the employer pays the premium and it is typically a guaranteed issue life insurance plan. The most common plans are term life insurance ranging from $10,000 to $50,000 face amount. Some other plans are tied to an employees salary such as 2 times or 5 times annual salary to calculate the face amount. In most cases the employee loses coverage on the day employment is terminated for any reason. Always be sure to purchase enough life insurance on your own personal plan to protect your loved ones. Use your "free" group benefit as a supplement. I have never seen a widow turn down a life insurance proceeds check because it was just too much money at their time of need yet.
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When you look at this, this is a pretty good idea because you're going to have to pay up a little bit of economic tax on this, about $50,000 of death benefit, because you're really gaining a benefit. To me, that's pretty worth it because wherever you have to pay a little bit in taxation for the benefit, you're not really putting this out on your hand. Depending upon if your employer is paying it or depending upon if you're paying it, it really is still a pretty good idea. You have permanent coverage based on all these lives on a group case and you have a little bit of cash value accumulating in this. It's great for supplemental retirement income. You can look at universal life as a double-edge; a way of protecting assets, protecting your life, as well as having some income later on.