Group Carve-Out Plan

AAA

DEFINITION of 'Group Carve-Out Plan'

A type of group term life insurance designed to appeal to well-paid executives by improving their employer-sponsored life insurance coverage. Under a group carve-out plan, the employee retains $50,000 of ordinary group term life insurance coverage, but the rest is provided by a universal life insurance policy. The group carve-out plan replaces the current group life insurance amount over $50,000 on the people the company wishes to carve out.

INVESTOPEDIA EXPLAINS 'Group Carve-Out Plan'

Disadvantages of ordinary group term life insurance include its non-discrimination requirement, loss or reduction when the employee retires or leaves the company (or high expense to continue it), and imputed income costs for coverage over $50,000. The universal life policy improves the overall life insurance package in that it is portable and can create supplemental retirement income through its cash value. It is also not subject to non-discrimination rules, allowing employers to offer it only to the employees they care most about retaining, such as top executives.

RELATED TERMS
  1. Traditional Whole Life Policy

    A type of life insurance contract that provides for insurance ...
  2. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  3. Life Insurance

    A protection against the loss of income that would result if ...
  4. Cash Surrender Value

    The sum of money an insurance company will pay to the policyholder ...
  5. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  6. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
Related Articles
  1. Home & Auto

    A Look At Single-Premium Life Insurance

    Want to provide for your dependents and finance your own long-term care? Learn more here.
  2. Insurance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  3. Retirement

    Variable Vs. Variable Universal Life Insurance

    Do you know why you might need one policy versus the other? Read on to find out.
  4. Options & Futures

    How To Avoid Taxation On Life Insurance Proceeds

    Decrease the value of your taxable estate and prevent the tax man from getting you one last time.
  5. Retirement

    Life Insurance: How To Get the Most Out Of Your Policy

    There are many benefits to owning a life insurance policy - if you get the right one for you.
  6. Home & Auto

    Life Insurance Clauses Determine Your Coverage

    Understanding these key parts of your policy will help you to ensure that your family will be covered.
  7. Insurance

    Life Insurance: Putting A Price On Peace Of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  8. Insurance

    Finding The Best Health Insurance You Can Get

    A close look at the pros and cons of Aetna vs. Cigna PPO health insurance helps you decide what's important for you.
  9. Insurance

    Avoid The No-Health-Insurance Penalty By Feb 15

    If you don't have health insurance, act NOW or you could owe penalties on your 2015 taxes, in addition to this year's.
  10. Professionals

    Retirement Bliss? Not So fast: When Savings Lag

    Most people aren't saving enough for retirement. Here are some tips savers and financial advisors can use to change that.

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center