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 component two distinctly different financial benefits 1policyholders 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 150 000 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 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 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 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 2cash values generally accumulate after a year grow at a fixed rate and can be accessed tax free at any time special considerationsa 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 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 types of life insurance policies advantages and disadvantages of a group universal life policylife 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 3some employers also provide some other benefits with these policies 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 