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. Life Insurance

    A protection against the loss of income that would result if ...
  3. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  4. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  5. Employer-Sponsored Plan

    A type of benefit plan that an employer offers for the benefit ...
  6. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
RELATED FAQS
  1. What are the financial benefits of retiring in the Philippines?

    Of those countries considered friendly to the United States, the Philippines has one of the lowest standards of living and ... Read Full Answer >>
  2. Do I need to file an income tax return every year?

    Contrary to popular belief, there are indeed situations where a person does not need to file a tax return every year. For ... Read Full Answer >>
  3. How does life insurance help high net worth individuals protect their businesses ...

    Life insurance protects the businesses and personal wealth of high-net-worth individuals, or HNWI, by guaranteeing their ... Read Full Answer >>
  4. What is the usual profit margin for a company in the insurance sector?

    The best estimates of the average insurance company net profit margin are between 3 and 8%, with a likely median average ... Read Full Answer >>
  5. What financial ratios are most useful for an investor to evaluate the liquidity of ...

    An insurance company, like any other nonfinancial company, needs access to liquidity in case it needs to fulfill its debt ... Read Full Answer >>
  6. In what ways does government regulation impact the insurance sector?

    Regulation is not consistent among all forms of insurance. The kinds of regulations imposed on AIG for guaranteeing credit ... Read Full Answer >>
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. Retirement

    Understanding Defined Benefit Pension Plans

    An employer-sponsored retirement plan where employee benefits are based on a formula using factors such as salary history and duration of employment.
  9. Professionals

    Why Retirement Planning Differs for Women

    Women face unique challenges when it comes to saving for retirement compared to men. Here's why and how to better prepare.
  10. Professionals

    Indexed Universal Life Policies: Watch These Risks

    By properly vetting indexed universal life policies, advisors and savers can avoid contracts that could prove overly costly over the long run.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center