What is Employee's Whole Life?
Employee's Whole Life is a life insurance policy you purchase through your employer. You pay premiums for this coverage through voluntary payroll deduction which means premium payments are deducted directly from your paycheck (after you sign a Payroll Deduction Authorization form). There are no checks to write or payments to mail.
Because this coverage is offered to many employees at once, premiums are generally lower than they would be for the same level of whole life insurance purchased as an individual.
Employee's Whole Life doesn't affect any group life insurance provided by your employer, but it may be an ideal way to supplement this coverage. It may also be used as stand-alone protection when your employer does not provide group life insurance coverage.
Your Employee's Whole Life coverage has portability, which means you have the option to continue the coverage on an individual basis if you leave the company for another job or if you retire. Several ongoing premium payment options are available to you if you decide to continue this coverage after leaving your employer.
Employee's Whole Life can be a solid foundation upon which to build a long-term financial plan because it guarantees lifetime protection for you and/or members of your family. As a form of permanent insurance, it protects you for your whole life, from the day coverage begins until you die, as long as premiums are paid. Employee's Whole Life insurance builds cash value and is eligible to receive dividends.
What can Employee's Whole Life do for you?
Employee's Whole Life insurance provides basic insurance protection, and can also be used for...
- Mortgage protection: Death benefit can be used to help pay off mortgages and other outstanding debts in the event an insured person dies prematurely.
- Retirement funding: Cash values can be accessed through loans or withdrawals to supplement a retirement income. Loans and/or withdrawals will reduce the death benefit.
- Family coverage: If you are eligible for coverage, your spouse, children and even grandchildren may be able to obtain protection through the program, even if you choose not to purchase coverage on yourself. To apply, they answer a few simple questions about their medical history.
- Estate preservation: Employee's Whole Life proceeds may keep your estate intact by providing funds to cover estate taxes. This may help your heirs avoid having to use cash, secure a loan, or sell assets or a business to pay these taxes.
How does it work?
- If your employer decides to offer an Employee's Whole Life Insurance program, all eligible full-time employees may apply for coverage. An eligible employee's spouse, children, and/or grandchildren may also apply for coverage.
- A completed application is all that's generally necessary for the company to accept the risk. A physical exam is usually not required.
- Your insurance coverage begins under a temporary coverage agreement as soon as you sign the application and the Payroll Deduction Authorization form. A permanent policy is issued soon after that. Premiums for the policy are deducted directly from your paycheck. There are no checks to write or payments to mail.
- Generally after the first year, the policy begins to accumulate cash value, and the amount of cash value usually increases every year. Cash values accumulate on a tax-deferred basis. This money can be used to help purchase a home, fund a child's education, supplement retirement income, or for any other purpose. You may also choose to leave it in the policy and allow it to grow. The cash value can be accessed via policy loans and/or withdrawals. Loans and/or withdrawals will reduce the death benefit.
- A whole life policy can receive dividends. Dividends are determined by the company's board of directors each year and are not guaranteed. When a dividend is payable, you may choose to take it in cash, use it to purchase more insurance or to pay or reduce your premiums. The dividend a policy earns fluctuates from year to year and is not guaranteed.
- When you die, the company will pay your beneficiaries the death benefit, the face amount of the policy less any outstanding loans or withdrawals. This money is generally received by the beneficiaries free from federal income tax.
Employee's Whole Life insurance means...
- Permanent protection, offered through your employer, that can never be canceled as long as premiums are paid.
- Usually no need to provide medical evidence of insurability in order to be covered.
- The convenience of payroll deduction to pay premiums.
- The ability to extend coverage to your spouse, children, and grandchildren.
- The ability to continue the policy even if you leave the company or retire.
- A guaranteed death benefit, generally free from federal income tax.
- Tax-deferred cash value accumulation.
- The potential to earn dividends. (Dividends are not guaranteed.)
Your participation in the voluntary payroll deduction insurance program is completely voluntary. Since this program is not intended to be subject to the Employee Retirement Income Security Act of 1974 (ERISA), your employer cannot contribute to or endorse any policy offered under this program.
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Issued by New York Life Insurance Company, 51 Madison Avenue, New York, NY 10010.
Rating: 5.0/5 (3 votes cast)
Consult an Agent:
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New York Life Insurance and Annuity Company does not provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.
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