What is Group Universal Life Policy (GULP)

A group universal life policy is universal life insurance offered to a group that is less expensive than what is typically offered to an individual. A group universal life policy is most commonly purchased by businesses looking to provide life insurance coverage for their employees.

BREAKING DOWN Group Universal Life Policy (GULP)

Buying a group universal life policy is similar to buying food in bulk. The cost to cover each individual is cheaper because the policy is designed to cover a large group, just as purchasing a large amount of a particular grocery item is cheaper on a per item basis than buying each item separately.

A group universal life policy is a type of permanent life insurance that features a savings component. Employees may choose to pay only the cost of insurance premium or to make additional payments to the cash value of a policy, which can be accessed through loans or withdrawals. These additional sums are allocated to a guaranteed account, which earns a minimum fixed interest rate for cash value growth. 

A GUL provides flexible premium payments and reliable cash value growth tied to a fixed interest rate, offering stable growth over time. Generally, a policy begins to accumulate cash value after about a year, and the amount of cash value usually increases every year thereafter. Cash value is available for withdrawal at any time – at any age – generally without tax penalties. A policyholder may also choose to leave it in the policy and allow the cash value to grow. Employees can start, change or stop additional premiums at any time, without charge. Policyholders also get the convenience of making contributions via payroll deductions, or they may contribute any lump sum in addition to their premiums. A GUL provides a death benefit plus an optional cash accumulation account. 

A group universal life policy can also receive dividends. The amount of a dividend is set by a company’s board of directors each year and are not guaranteed. When a dividend is payable, a policyholder can take it in cash, use it to purchase more insurance, or use it to pay or reduce premiums. The dividend a policy earns fluctuates from year to year and is not guaranteed.

Group Universal Life Policy Living Benefits

Employers can choose to offer living benefits, including:

  • Portable coverage that allows employees to continue coverage when they change jobs or retire
  • Accelerated benefit to employees upon diagnosis of a terminal illness
  • Waiver of premium if an employee becomes totally disabled