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What is Group Carve Out Insurance?
Employees depend on their group insurance protection. The problem
is that the plan is set up so that coverage terminates at the
employee’s retirement. At this time, the employee has few
choices:
- Lose coverage at retirement;
- Apply for individual coverage at the time of retirement (assuming
insurability); or
- Carry duplicate coverage during working years to assure adequate
coverage during retirement years.
Group Carve Out is a concept designed to alleviate the restrictions
of group term life insurance under Internal Revenue Code Section
79. The concept involves carving out those key employees who
cannot fully participate in the group term plan and providing
them with individual life insurance policies. Typically, the
key employees receive $50,000 of group coverage (maximum amount
they can receive without incurring income taxation) and the rest
of the benefit is funded with individual contracts.
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