Group life insurance products

» Group Term Life insurance
» Group Universal Life insurance (GUL)
» Variable Group Universal Life insurance (VGUL)
» Accidental Death & Dismemberment

Group Term Life insurance

A cornerstone of your financial security

This information is meant as a general guide to life insurance only – it doesn’t refer to a particular product.

What does Group Term Life insurance provide?

Group Term Life insurance is a foundation of insurance protection for employees and their families. It provides protection for a specific period of time and pays a benefit only if the insured dies during the term. There is no cash value buildup in a term life insurance policy. Group Term Life insurance provides a base level of protection that can be enhanced by personal savings, individual life insurance and Social Security benefits. The death benefit is paid income tax free to the beneficiary.

Types:

  • Basic Group Term Life coverage provides a basic level of life insurance, often paid for by the employer. Premiums for up to $50,000 of coverage paid by the employer are considered an income tax-free benefit to the employee.
  • Supplemental Group Term Life coverage is voluntary coverage paid for by the employee, allowing the employee to choose the amount of insurance that fits his or her personal and financial situation. Employers often offer this insurance in conjunction with an employer-paid Basic Term Life plan.
  • Portable Term Life insurance provides supplemental coverage to employees and dependents who lose eligibility under the group policy. Employees can take this protection with them if they leave the group or retire and continue coverage until age 70 (under most plans) by making payments directly to the insurer. Payments can be conveniently continued through electronic funds transfer (EFT).

Group Universal Life insurance (GUL)

This information is meant as a general guide to life insurance only – it doesn’t refer to a particular product.

What does Group Universal Life (GUL) insurance provide?

GUL insurance combines elements of term and whole life insurance in one policy.

You can choose to pay only for the cost of the life insurance protection or you can also make premium contributions above the cost of the insurance to build cash value. The portability and cash accumulation features of GUL fit individual needs, while offering the advantages of group insurance, such as simplified underwriting and affordable rates.

Features:  

  • Affordable insurance protection -- the buying power of a group makes this coverage affordable.
  • A cash value account offers an option for tax-deferred cash accumulation. Cash values earn a guaranteed rate of interest and are accessible through loans and withdrawals.
  • Extended coverage – can be continued until age 100.
  • Dependent coverage generally available as a rider to the plan.

» How does cash value work?

Variable Group Universal Life insurance (VGUL)

This information is meant as a general guide to life insurance only – it doesn’t refer to a particular product.

What does Variable Group Universal Life insurance provide?

VGUL combines flexible life insurance with the option to invest in a variety of subaccount options, as well as a guaranteed account. You can choose to pay only for the cost of the life insurance protection or you can also make premium contributions, above the cost of the insurance, to accumulate cash value.

VGUL is often used in executive benefit plans or as a funding vehicle for retiree life insurance. Keep in mind that the primary reason to purchase life insurance products is the death benefit.

Features:

  • Affordable insurance protection – the buying power of a group makes this coverage affordable.
  • An investment option allows for tax-deferred cash accumulation. Contributions earn a market rate of return which fluctuate based on the performance of the investment subaccounts and when redeemed may be worth more or less than the original investment. 
  • Extended coverage – can be continued until age 99
  • Dependent coveragegenerally available as a rider to the plan
  • Investment account options — Variable subaccount options cover a wide spectrum of investment styles and risk profiles. You can allocate your premiums among the account options to suit your personal financial objectives.

Since it is primarily an insurance product, VGUL does contain fees and expenses such as management fees, fund expenses, distribution fees and mortality and expense charges.

How does cash value work?

Some life insurance policies have a cash value account or investment component that lets you contribute premium in addition to the amount you pay for your insurance coverage. The money can stay in the policy to increase the amount paid when you die or may be used during your lifetime for long-term financial goals through loans or withdrawals, such as:

  • health care needs
  • retirement income
  • college tuition for yourself, a child or grandchild
  • a down payment on a home or remodeling your current residence

Although the primary reason for purchasing a life insurance product is the death benefit, building cash value in a life insurance policy is attractive because:

  • You can start, change or stop additional premium contributions at any time.
  • If you purchase the policy through your employer, you can make contributions through the convenience of payroll deduction or send lump sum contributions to the insurance company at any time.
  • Because any gains in the investment options or cash value account grow tax deferred, you can potentially accumulate money faster than a taxable investment offering a similar rate of return.
  • You may access cash accumulated in the policy by withdrawal or loan for any reason. Loans and withdrawals will reduce both the policy cash value and the death benefit.
  • Generally, you are not taxed on any earnings on the money accumulated until you withdraw more than the premiums that have been contributed to the policy – this includes premiums you or your employer pay for the cost of insurance. (The tax treatment changes if your policy is a Modified Endowment Contract (MEC).)

The premiums you choose to contribute to the cash value are after-tax and are assessed an administrative fee when going into the policy. Contributions to the cash value account of a Group Universal Life policy earn a fixed rate of return guaranteed not to fall below a certain percentage. Contributions to the investment option of a Variable Group Life policy may be invested in a fixed account and/or in investment subaccounts as you direct and earn a market rate of return which fluctuates based on the performance of the investment subaccounts and when redeemed may be worth more or less than the original investment. 

If you intend to contribute money to the cash value account or investment option, you may want to request an illustration. An illustration shows how cash value builds with additional amounts you contribute.

You should consider the investment objectives, risks, charges and expenses of a portfolio and the variable insurance product carefully before investing. The portfolio and variable insurance product prospectuses contain this and other information. You may obtain a copy of the prospectus from your representative. Please read the prospectuses carefully before investing.

This is a general discussion of the relevant tax laws. It was not intended for nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to the specific fact pattern.

Accidental Death & Dismemberment (AD&D)

AD&D coverage provides a benefit if bodily injuries result in a covered person’s death or dismemberment as the result of an accident. AD&D typically pays a benefit for injuries involving the loss of fingers, limbs, sight and permanent paralysis, but coverage and benefit amounts vary by the insurer and plan design. Generally suicide, death by illness and death by natural causes are not covered by AD&D insurance.

Common types of AD&D plans include:

  • Basic AD&D is included with a group life insurance program. The AD&D death benefit and the group life benefit amounts are often the same.
  • Supplemental or voluntary AD&D is offered as a separate benefit group members can elect. Premiums can be paid via payroll deduction.
  • Travel or business accident protection AD&D provides supplemental protection to employees traveling on company business. Premiums are typically paid by the employer.
  • Dependent AD&D coverage for dependents is offered on a voluntary basis. Coverage is typically a percentage of the employee’s benefit.

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