Among the many opportunities for producers today, one that is often overlooked is Executive Group Term Carve-Out. Simply put, a group term carve-out removes executives from the company’s group term life plan and places them in a program that generally provides a higher face amount, permanent coverage and additional benefits.
An executive group term carve-out can open doors for producers by providing access to the company’s top and most influential employees. Carve-out plans are advantageous for all parties involved: employer, executive and producer.
A challenge many employers face in this time of escalating benefits costs and recent scrutiny regarding executive benefits, is to be on the lookout for innovative ways to create overall total compensation packages for key executives, while holding down costs and offering better benefits.
Since most employers provide life insurance, this is a great place to start looking at executive benefits. Group term life insurance is used in most employee benefit plans because it’s cost effective, and easy to implement and administer. Group term works fine for most employees. However, there’s a better way to offer a more comprehensive benefit for executives. That’s where an executive group life carve-out plan can be a valuable addition to a company’s benefit program.
These plans usually are structured as an executive group term carve-out plan or under a Sec. 162 bonus plan between the employer and executive. While creating some level of current income for the executive, the benefits and flexibility of these programs make them attractive options.
Group life carve-out plans utilize generally group universal life insurance designed to provide a lifetime of life insurance protection. In most plans the employer pays premiums to cover the cost of insurance similar to a group term life plan. In more generous plans, the employers will bonus additional amounts to the key employees to increase the certificates’ account value.
In addition to funding flexibility for employers, group life carve-out plans offer many more benefits:
–Income tax-free death benefits (the same as for group term life plans).
–Some offer a portability option.