Group Universal Life insurance offers group insured individuals an opportunity to put away funds for later life in a Cash Accumulating Fund (CAF), that earns interest on the savings until it reaches the age of majority. Active members above the age of 70 are eligible for accidental death & dismemberment insurance. The plan covers the entire insured’s family in the event of his or her death.
As stated, the cash accumulating fund may be utilized to pay for funeral costs as well as the financial obligations incurred by an insured. If an insured dies early, his or her dependents may use the accumulated funds to provide for a debt settlement. However, the account must be closed and the cash paid out before the insured’s death.
Some people choose group universal life insurance because of the tax deferral. Universal life insurance is typically less expensive to maintain than Term life insurance. In addition, with group insurance, the cost of the premiums is spread over a large number of insured members, thereby reducing the risk to the company. Since the insured pays only a portion of the premium and the remainder is returned to the company, there is no need to pay an additional tax on those payments.
There are three types of group insurance policies available: universal, term and group renewable term. These are discussed below.
Universal life insurance pays a percentage of an insured’s salary towards a death benefit. The premium, however, is not taxable to the insured’s beneficiaries. This is sometimes referred to as a cash benefit plan.
Term universal life insurance is similar to the latter, but pays a percentage of the insured’s monthly salary until such time that he or she reaches the age of death. Again, the insured is not taxed on the amounts paid until his or her death. With this type of insurance, the policyholder will pay taxes only if he or she had a death benefit paid. when he or she was still alive.
On the other hand, the more common type of group insurance is group renewable term insurance, which is similar to a term life policy but pays a predetermined sum of money at a specific number of intervals. These amounts are added to the cost of the premiums each month.
If you are currently insured with a term or renewable term policy, you may want to consider changing to group universal life insurance instead. Since your premium payments are tax deferred and have a predetermined amount, the insurance company receives no income tax on them. When you pay your premiums, the company pays any future tax liability that is incurred.
In certain circumstances, it may be wise to purchase group universal life insurance even before you reach the age of 60. While this may seem costly at the time, it can save you hundreds of dollars in taxes and allow you to continue enjoying your life in a high deductible plan. Additionally, it may be a good financial move in the long run if you live long enough to realize the deferred payments.
As you can see, there are many types of life insurance policies. It is important to understand the different types so that you can make the right choice for your needs. However, most people want group universal life insurance because of the tax deferral and flexibility that they offer.
While some people prefer to pay a lower premium amount now, they may end up paying far more in tax in the future, especially if they decide to change their minds later on and purchase another type of life insurance policy. Since the initial premium is tax deductible, you may want to shop around for different types of group life insurance policies in order to save money.
There are several companies that offer group insurance plans. You can easily locate these companies by visiting a financial planning service.