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 if you purchased the same level of whole life insurance 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: In the event that an insured person dies prematurely, the death benefit can be used to help pay off a mortgage or other outstanding debt.
- Retirement funding: Cash values can be accessed through loans or partial surrenders to supplement retirement income as your life insurance needs decrease. Loans and/or partial surrenders will reduce the death benefit and cash value. Loans also accrue interest.
- 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. When they apply, they need merely to 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 make Employee’s Whole Life insurance available for employees to purchase, 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 accessed 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 loans or partial surrenders.
- 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 use it 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, which is the face amount of the policy less any outstanding loans or withdrawals. This money is generally received by the beneficiaries free from federal income taxes.
Employee’s Whole Life insurance means…
- Permanent protection 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 taxes.
- Tax-deferred cash value accumulation.
- The potential to earn dividends.