Thursday, June 16, 2022

What Is Group Universal Life Insurance

Don't Miss

Insuranceopedia Explains Group Universal Life Insurance

Is Universal Life Insurance A Good Idea?

Getting life insurance coverage through a group universal life insurance policy can be significantly cheaper than purchasing the same coverage individually. As with many other commercial products, buying in bulk makes it easier for the supplier to reduce prices because of the high volume of guaranteed business.

Businesses may offer group universal life insurance to entice prospective employees and set themselves apart from competitors who do not provide comparable benefits.

Related Question

Whats The Best Insurance Investment

The best insurance investment is not to invest in insurance.

If you remember that the purpose of insurance is to replace your financial contribution to your family in the event of your death, its essential to have what your family will need to carry on, but insurance is not a financially savvy way for you to make money.

The smartest option is to buy term life insurance. You will pay a much lower premium than you would with whole or universal. Then take the money you saved on premiums and invest it in an IRA or mutual funds that are not connected to insurance. You will earn a much higher rate without the attached fees.

If you do this, by the time your term insurance policy matures, you will no longer need insurance. You should have enough in your investments to be self-insured. You and your family will benefit not the insurance company.

Disadvantages Of Group Universal Life Insurance

There are also some distinct disadvantages to using group universal life insurance. The first is that while group policies are much cheaper than individual policies, they may not be as affordable as purchasing a term life policy on your own. This is because term life policies are significantly less expensive than permanent policies. If youre young and healthy, you can get particularly affordable term life coverage. Although universal life insurance does have special flexibility and advantages over term life insurance, not everyone needs this type of coverage.

Also significant, there may be limits on the amount of coverage that you can purchase. If you want to expand your policy beyond what they offer, you will likely need to pay for it yourself. There may also be specific rules in the group policy that would not necessarily exist if you purchased the policy individually. In general, you wont have as much flexibility when purchasing a policy through your employer as you would purchasing it on your own.

You May Like: Insurance Company Open On Sunday

Why People Choose Universal Life Insurance:

Lifetime protection

From the first day the policy is in effect, UL can provide an income tax-free death benefit to help protect your familys financial wellbeing.4 And as long as you keep a positive cash value amount, your coverage cant be canceled.

Cash value

Like all permanent life insurance, it has a built-in cash value that grows over time and earns interest.5 You can take out policy loans against the cash value, use it to pay your premiums, or even use your coverage for cash to supplement your income in retirement.6

Flexible premiums

UL lets you raise or lower your payments within certain limits as your circumstances change. While you may eventually have to pay higher premiums to keep your coverage, that flexibility can make it easier to keep your insurance policy in force if your earnings vary.

Tax advantages

The policys cash value grows on a tax-deferred basis, so no taxes are owed on current earnings or interest. Also, the death benefit is paid income-tax-free to beneficiaries.

How Universal Life Insurance Works

Group Universal Life Insurance

A UL insurance option provides more flexibility than whole life insurance. Policyholders can adjust their premiums and death benefits. UL insurance premiums consist of two components: a cost of insurance amount and a saving component, known as the cash value.

As the name implies, the COI is the minimum amount of a premium payment required to keep the policy active. It consists of several items rolled together into one payment. COI includes the charges for mortality, policy administration, and other directly associated expenses to keeping the policy in force. COI will vary by policy based on the policyholders age, insurability, and the insured risk amount.

Collected premiums in excess of the cost of UL insurance accumulate within the cash value portion of the policy. Over time the cost of insurance will increase as the insured ages. However, if sufficient, the accumulated cash value will cover the increases in the COI.

You May Like: State Farm Pet Health Insurance Plans

What Are The Benefits Of Group Life Insurance

There are several benefits of group life insurance. Here are some of the advantages of group life insurance.

Easy application process most of the time, you just need to fill out a simple form indicating how much life insurance you want among other general information like your date of birth and gender.

Easy underwriting process the underwriting process for group life insurance is simple. Usually, group life insurance is offered on a guaranteed-issue basis. This means no underwriting no health questions, no paramedical exam, no MIB check or prescription drug check, no phone interview, and so on.

If you are thinking that this benefits those with moderate to severe health conditions, you are correct. The guaranteed-issue underwriting for group life insurance has to be the #1 advantage of the insurance.

However, depending on your company size, the carrier may require a simplified health questionnaire. We at My Family Life Insurance do work with a carrier that offers guaranteed issue term life insurance starting at 2 employees.

All of these seem great, right? Especially, the underwriting process where most group life insurance is issued on a guaranteed basis. That makes group life insurance an incredible opportunity, However, lets compare group vs. individual life insurance. You will see some major differences.

What Makes Universal Life Different From Other Long

Here are some factors to consider when comparing life insurance policies:

Guarantee vs. adjustable

For many people, a guaranteed death benefit is the most important aspect of their policy.* It means peace of mind for themand their loved ones. For others, having the flexibility to adjust their policy, including premiums, is more important, even if it means the death benefit could fluctuate.

  • Your level of oversightWith some kinds of life insurance, you can purchase a policy, put it away, and simply pay your premiums as they come due. With universal life, though, you can make changes to your policy, including adjusting your premiums and coverage.1 That flexibility can be very helpful if your circumstances change. It requires you to regularly review your policy, however, to help avoid risks.
  • Our level of oversightThere are factors impacting your policy that you can control and factors that you cannot control. Our auto-adjusted billing service actively monitors your policy and informs you annually if any changes are needed. This optional service is available at no additional cost to you and is a great way to make sure the objectives of your policy remain on track.

You May Like: Trustage Cmfg Life Insurance Reviews

Options When You Retire

In addition to withdrawals and loans, you have these additional options when you retire:

  • Choose to Continue Your Life Coverage You may continue to be covered under ExxonMobil Group Universal Life Insurance until age 95, however, if your retirement date is on or before December 1, 2015, your coverage will end at age 70. After you reach age 70, if you are no longer eligible to participate in the Group Universal Life option your coverage will automatically continue directly with MetLife, with premiums determined by MetLife, and your benefits will be reduced to the lesser of the current amount of the insurance or five times the value of the cash accumulation fund . If you receive a monthly pension, your premiums are automatically deducted. If you receive no pension payment, you are billed directly by MetLife. If you do not send a payment, your premiums will be deducted from your cash accumulation fund until the fund is depleted. There is a nominal administration fee for direct billing by MetLife.

At age 95, the insurance coverage with MetLife terminates, and you will need to select a distribution option for your cash accumulation fund. MetLife will provide you with these options.

You Can Customize Your Universal Life Insurance Policy With The Following Riders:

Universal Life Insurance

In most cases, there are a variety of ways to increase your level of protection or customize your policy. Your New York Life financial professional will be happy to brief you on all the add-ons, which are also known as riders, that are available with each policy. Some of the riders are free.

You also can choose how your death benefit will be paid to your beneficiaries. You can choose to provide a level death benefit equal to the policys face amount or an increasing death benefit that is equal to the policys face amount at the time of issue plus the cash value. Your New York Life financial professional will be able to help you decide which option best fits your needs.

  • Death Benefit Option 1

Read Also: How To Cancel My Cigna Insurance

Universal Life Insurance: Pros Cons And How It Works

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list ofour partnersandhere’s how we make money.

  • How to find the best universal life insurance company
  • If you need life insurance that lasts your lifetime, builds cash value and offers flexibility in payments and benefits, universal life could be the right choice. Unlike term life, universal life insurance doesnt expire it covers you until death. And unlike whole life, youll earn market-based interest on your cash value account.

    But with more control comes more responsibility. If that doesnt sound like a burden to you, universal life can be a good choice.

    What Is The Difference Between Whole And Universal Life Insurance

    A UL policy gives the insured person many of the same permanent protection and benefits as whole life coverage, along with the added benefit of a flexible premium to help accommodate variable earnings. In addition, depending on the life insurance company and policy, you may also have the option to invest your cash value in a variety of market-based investment options, giving you the potential for more growth. On the other hand, universal life offers fewer cash value guarantees.

    Recommended Reading: Does Car Insurance Cover Window Replacement

    Want The Opportunity For More Cash Growth Consider Variable Universal Life

    Variable UL gives you the same kind of lifetime protection and payment flexibility as standard universal life with more investment options: you can invest part or all of your cash value in subaccounts that are similar to mutual funds. However, you have to choose and manage investments as you would in a brokerage account. And as with a brokerage account, you also assume more risk, including the possibility of losing part or all of your principal.

    The Flexibility And Freedom Of Universal Life Also Mean That There Are Fewer Guarantees

    Does Your Indexed Universal Life Policy Have Riders to ...

    In a whole life policy, the premiums, cash value growth, and death benefit are guaranteed not to change. With UL, all those things are designed to be flexible. However, the amount of premiums you pay affects cash value growth. And as you use funds from the cash value, it will affect the amount your family receives when youre gone. It could even cause the policy to lapse, so you should stay in contact with your financial professional to help make sure your policy continues to meet your needs.

    You May Like: Can You Cancel Banfield Wellness Plan

    Advantages And Disadvantages Of A Group Universal Life Policy

    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 also provide some other benefits with these policies:

    • Portable coverage: This allows you to continue coverage even when you change jobs or retire.
    • Accelerated benefits: This type of coverage is extended to anyone diagnosed with a terminal illness
    • 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.

    You Cant Take The Life Insurance With You

    We touched on this earlier, but the subject deserves repeating.

    Your group life insurance, generally speaking, doesnt stay with you.

    If you leave your company, your group term life insurance stays with the company.

    Remember, they are the owner. Not you.

    Your company can also terminate the group plan anytime. Remember, they are the owner.

    I probably receive a few phone calls a month from people leaving their jobs or let go. They tell me they cant take their group life insurance with them.Moreover, some of them have disabilities or other health conditions. As we suggested, getting individual life insurance with a disability typically is a bit harder.

    This underscores an important point: you should get individual life insurance as soon as you possibly can. If you are ever let go from your job or leave your job, your loved ones will have life insurance protection through your individual policy.

    Read Also: Health Insurance For Rabbits

    How Group Universal Life Policies Work

    Many businesses feature group universal life insurance as part of their 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 death benefit to the insured party’s beneficiaries but also features a savings componenttwo 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 beneficiaries. For instance, someone who earns $50,000 per year may choose a coverage option of $150,000three times their salarybased 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 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 purchasing a large amount of a particular grocery item is cheaper on a per-item basis than buying each item separately.

    Cash values generally accumulate after a year, grow at a fixed rate, and can be accessed tax-free at any time.

    Indexed Universal Life Insurance

    What is indexed universal life insurance (IUL)?

    Indexed universal life insurance offers lifelong coverage and may have some flexibility with the death benefit and premiums. You may be able to adjust your death benefit and payments within certain limits if your needs or budget change.

    Theres a cash value component in IUL thats often tied to a stock market index such as the Nasdaq-100, S& P 500 or a combination of indexes. You might also have the option of a fixed-interest investment.

    When you pay premiums, part of the money goes to policy fees and charges, and the remaining goes into cash value.

    Its important to understand the boundaries of your potential investment gains. Indexed universal life insurance policies have participation rates and caps. The participation rate is a portion of the index gains that your cash value will actually receive. For instance, if your index went up 10%, and you have a participation rate of 50%, youll gain 5% upside. Additionally, theres usually a cap, which is the maximum percentage you can gain no matter how well the index performs.

    If your index plummets, youll still have a floor that guarantees a minimum return rate, which can be 0%. Still, its possible to lose all your cash value if policy charges and expenses eat through your money.

    Despite its complexity, indexed universal life insurance is a popular product. That may be largely due to advisors steering clients toward these policies.

    Recommended Reading: Dental Bonding Covered By Insurance

    What Are The Benefits Of Group Universal Life Insurance

    If your company has a group universal life insurance policy, there are many advantages to taking advantage of this life insurance offering. The biggest advantage is that you may be able to save a lot of money on universal life insurance by going through a group policy, depending upon your age and health. Universal life insurance can be very expensive when you purchase it on your own, so group policies are a good way to get permanent coverage that you might not otherwise be able to afford.

    Additionally, most group policies do not require an in-depth medical exam. When you purchase an insurance policy on your own, you need to complete an exam as part of your application process. Those with chronic health conditions are typically charged higher prices and may even be denied coverage completely! With a group policy, youll still have to answer health questions in order to get the policy, but your health wont be as big of a deciding factor when it comes to your premium prices. This enables those who are not in great health to buy a universal life insurance policy at a great price.

    More articles

    Popular Articles