Group universal life insurance is most often offered through an employer, although it may also be available through trade and credit unions, fraternal organizations, colleges and universities, and other associations. As with any group insurance coverage, the premiums are lower because the policy covers an entire group rather than a single individual.
Unlike group term life insurance, which may be canceled when a person leaves his or her job, universal life insurance is a permanent policy and individuals are able to continue paying premiums to maintain the coverage.
Universal Life Insurance Pros and Cons
Universal life insurance is permanent coverage and has an investment component which accrues cash value over time. The premiums are usually flexible with a minimum and maximum payment rather than a fixed premium, like whole or term.
Because the risk to the insurance company is spread out over a group of employees ranging in health and age, universal rates are much lower than those of other permanent policies purchased individually. Group universal coverage is usually guaranteed and an individual cannot be turned down for chronic illness or advanced age.
On the other hand, group options have a cap on death benefit limits, which may mean an individual has less coverage than he or she actually needs. The policyholder may not be able to select the death benefit limit, and the death benefit may be based on his or her salary or other criteria set by the employer. Employees usually pay the entire premium for group universal protection, despite being purchased at discounted rates.
Alternatively, group term contracts are often employer-subsidized so the employee does not pay the entire premium. Despite the numerous pros and cons, universal life insurance is among the best types of coverage for families who are looking to build wealth and a nest egg for retirement.
Rate quote comparisons can show potential applicants just how affordable and cheap policies and rates can be, and allow insurance companies to offer free quotes so consumers can find the best policy available.
Advantages of Permanent Life Insurance
A permanent life insurance policy may be used as a financial instrument and investment because it has a cash value. Policyholders can borrow up to 90% of the cash value in the form of low interest loans. No income tax is charged on profits until gains are withdrawn from the policy, so the money can grow without affecting the policyholder’s tax bill.
Permanent protection does not expire and can only be canceled for non-payment of premium so the policy stays in effect throughout the person’s life.
The advantages of an inexpensive group universal life insurance policy usually outweigh the disadvantages. The biggest disadvantage is the limited coverage offered by employers. Purchasing an affordable term policy to supplement universal life insurance is cheaper than buying an individual permanent policy for the full amount. Since the coverage can usually be continued after an employee leaves his or her job, universal premiums remain cheap and affordable.
Universal life insurance has its own pros and cons, but when compared to term, it has the advantage of never expiring or needing to be renewed. Unlike term contracts, policyholders will never need another medical exam or to apply for coverage again, avoiding an increase in policy rates.
Universal life insurance also has a cash value which is not available in term life policies. Since permanent life insurance has higher rates than term, some people cannot afford their protection, but group universal life insurance offers cheaper rates than individual, privately purchased policies, making universal plans affordable to more people.