What Is Group Life Insurance?

Group life insurance is a structure where a single master contract covers multiple individuals — typically the employees or members of an organization. Instead of each individual applying separately, the employer or group sponsor purchases one policy that extends coverage to eligible participants.

Most people are familiar with the basic version: a simple term-based benefit — often one to two times annual salary — offered as part of a standard benefits package. It is accessible, inexpensive, and straightforward.

But accessible and straightforward does not mean sufficient — and it certainly does not mean strategic.

This guide explains the limitations of conventional group life, and how a properly structured Group Indexed Universal Life (IUL) program can transform a routine benefits expense into a powerful retention tool and long-term balance sheet asset.

 

The Problem with Traditional Group Life

Conventional group term life insurance is ubiquitous — and for most employers, it is entirely one-dimensional. Premiums are paid, coverage exists while employment continues, and when the employee leaves, the benefit disappears. There is no residual value, no asset, and no leverage for the business.

 

The Core Problem Traditional group life is a pure expense. Premiums paid today return nothing to the business tomorrow. Coverage is tied to employment, so it creates no loyalty mechanism. There is no cash value, no capital recovery, and no flexibility. Once the benefit is paid, it is gone.

 

Beyond the financial limitations, traditional group coverage often fails at the strategic level:

• Coverage ends when employment ends — employees have no incentive to stay just because of a basic term policy
• No medical underwriting flexibility means some employees who need it most may not qualify for individual coverage outside the group
• Salary-multiple formulas cap coverage in ways that may significantly under-protect high earners
• The employer receives zero return on premium spend — it is a cost center with no asset counterpart
• Scaling is cumbersome — as headcount changes, coverage must be continually renegotiated or redesigned
• Employers who want to convert benefit spend into a recoverable balance sheet asset
• Organizations experiencing talent retention challenges without wanting to permanently inflate payroll
• Groups that include employees who may not qualify for individual life insurance through underwriting
• Business owners planning for buy-sell funding, key-person coverage, or succession transitions
• Leadership teams seeking a scalable benefits structure that grows with the organization
• Any employer wanting guaranteed coverage across their full workforce with no health-based exclusions
• Creating a recoverable asset — or producing a pure, unrecoverable expense?
• Building retention leverage — or simply providing a commodity benefit employees forget they have?
• Growing in value over time — or expiring the moment an employee leaves?
• Integrated with your capital and tax strategy — or operating in isolation?
• Intro Call — We review your organization size, current benefits, and strategic goals to confirm fit
• Data Intake — A simple employee census is collected to design preliminary coverage and pricing ranges
• Carrier Quotes — We obtain Guaranteed Issue quotes and finalize coverage structure and pricing across A+ rated carriers
• Setup & Materials — Application forms are prepared for employer and employee signatures
• Go-Live — Policies are issued and coverage becomes active
• Ongoing Support — We handle new hires, billing, claims, and annual reviews

 

Program Benefits: Employer & Employee

The following table summarizes how the Sky Gem Group IUL program delivers value at every level of the organization:

 

Category	Employer / Owner Benefits	Employee Benefits
Balance Sheet	Premiums create a corporate-owned asset. Cash value grows tax-deferred and appears as a long-term asset — not a sunk cost.	No impact to personal balance sheet. Benefit is provided at no cost.
Capital & Liquidity	Future access for liquidity, acquisitions, buy-sell funding, executive benefits, and cost recovery.	—
Funding Flexibility	Can be self-funded, policy-loan-funded, or premium financed. Preserves operating cash.	No out-of-pocket premium cost.
Retention & Stability	Non-portable benefits create retention leverage. No annual renegotiation. Scales cleanly with growth.	Incentive to stay long-term. Rewards tenure. Predictable, growing benefit.
Risk Management	Guaranteed coverage across workforce. Reduces key-person exposure. Predictable costs.	Guaranteed life insurance protection. No medical underwriting required. Coverage regardless of health status.
Tax Efficiency	Potential interest deductibility depending on structure.	Tax-free income via policy loans (in vested designs).
Who Benefits Most	Business owners seeking retention, capital efficiency, and risk control.	Employees with families, uninsurable individuals, and long-tenured staff.

 

Three Ways to Fund the Program

Employers can structure and fund a Group IUL program in three primary ways depending on their capital priorities, risk tolerance, and cash flow preferences:

 

Design	How It Works	Cash Flow	Best For
Premium Finance	Bank funds premiums using policy as collateral. Company services interest (Years 1–6). Bank loan repaid via policy loans around Year 17.	Minimal early out-of-pocket. Interest + collateral required.	Owners seeking maximum policy size and leveraged accumulation while preserving operating capital.
Self-Fund	Company pays premiums directly for the first 3 years. From Year 4–20, policy loans fund ongoing premiums.	Moderate initial outlay ($3M over 3 yrs). Self-sustaining thereafter.	Owners seeking independence from lenders, long-term control, and tax-free cash value growth.
Traditional	Straight 20 years of annual premium payments. No loans or financing involved.	Predictable, steady annual payment for 20 years.	Owners preferring simplicity, stability, and fully unleveraged ownership.

 

Funding Note All projections assume a constant index crediting rate. Actual performance will vary. Any tax deductibility or treatment depends on specific structure and must be reviewed with a qualified tax advisor. Sky Gem works alongside your existing tax counsel and legal advisors to ensure every strategy is compliant and properly coordinated.

 

Who This Program Is Designed For

The Sky Gem Group IUL strategy is adaptable across industries and organization types. It is particularly well-suited for:

 

Sector Flexibility This program is not limited to any particular industry or profession. Medical groups, law firms, financial services companies, construction businesses, family-owned enterprises, and corporate groups of all sizes have implemented similar structures. The design is fully adaptable to the size, composition, and goals of any qualifying group.

 

A Different Approach: The Sky Gem Group IUL Strategy

Sky Gem Solutions structures group life programs using Guaranteed Issue Indexed Universal Life (IUL) policies — a fundamentally different instrument than a standard group term policy. The shift changes everything: from who owns the policy, to what happens to premiums, to how the benefit functions as a retention tool.

 

Core Concept The employer purchases corporate-owned life insurance (COLI) policies on employees. These are permanent, cash-value-building policies — not term coverage. Premiums do not disappear: they accumulate as tax-deferred cash value on the company's balance sheet. The employer retains ownership and control. Benefits are structured with customizable vesting schedules that reward tenure. And because coverage is Guaranteed Issue, no employee is turned away for health reasons.

 

This is not just a benefits decision. It is a retention, capital, and risk management strategy embedded directly into the balance sheet.

 

Side-by-Side: Traditional vs. Sky Gem Group IUL

The table below illustrates the key differences between a standard group life program and the Sky Gem approach:

 

⚠ Traditional Group Life	✦ Sky Gem Group IUL Strategy
✕ Pure expense — premiums disappear with no recovery	✔ Premiums create a corporate-owned asset (cash value on balance sheet)
✕ Coverage ends when employment ends — non-portable loss	✔ Non-portable by design — creates employer-controlled retention leverage
✕ No cash value — zero long-term financial return	✔ Cash value grows tax-deferred; accessible for liquidity, buy-sell, or distributions
✕ Requires medical underwriting — some employees excluded	✔ Guaranteed Issue — no medical underwriting, all employees covered
✕ Fixed benefit, no flexibility once in place	✔ Vesting schedules, death benefit, and distributions are fully customizable
✕ No retention mechanism beyond basic coverage	✔ "Golden handcuffs" built in — early exit forfeits unvested value
✕ Employer has no capital recovery	✔ Employer can recover costs starting from Year 21–23 via policy loans
✕ No tax planning integration	✔ Potential interest deductibility; tax-free income via policy loans
✕ Scales awkwardly — requires redesign as headcount grows	✔ Scales cleanly with headcount — no annual renegotiation required

 

How the Sky Gem Group IUL Program Works

The program follows a clear structure that benefits both the employer and employees at each stage:

1. Policy Setup & Guaranteed Issue

The employer sponsors a group of Indexed Universal Life policies — one per covered employee. Because this is a group program, coverage is Guaranteed Issue: no medical underwriting, no health questionnaires, no exclusions. Every eligible employee is covered regardless of age or health status.

2. Corporate Ownership & Balance Sheet Impact

Policies are owned by the company, not the individual employee. This is a critical distinction. Each premium payment builds cash value inside the policy — a corporate asset that grows tax-deferred. Rather than disappearing as an expense, premium dollars accumulate on the balance sheet and remain accessible to the business for future liquidity needs, acquisitions, buy-sell funding, or executive benefit distributions.

3. Vesting Structure — Retention Built In

Unlike traditional group life, where the employee is entitled to the full benefit from day one, the Sky Gem structure allows the employer to define a vesting schedule. What can be vested is flexible — it can include a portion of the death benefit, access to cash value, or eligibility for tax-free supplemental income distributions via policy loans.

4. Tax-Deferred Growth & Tax-Free Distributions

Cash value inside each IUL policy grows indexed to market performance, with downside protection. Growth is tax-deferred. When the time comes to access value — whether for the employer's capital needs or as supplemental income for employees — policy loans can be structured to deliver tax-free distributions, subject to the policy remaining in force.

5. Cost Recovery for the Employer

In all three funding structures, the employer is positioned to recover the cost of the program over time — typically beginning around Year 21 to 23 — through policy loans split between the company and employees. This means the program ultimately has the potential to be cost-neutral or net-positive for the business over its full horizon, unlike traditional group term coverage, which is a permanent net cost.

Vesting Example Some clients choose to vest 50% of proceeds after a defined service period, with the vesting percentage increasing as tenure milestones are reached. This is simply one example — vesting can be designed in any configuration that aligns with your organization’s specific retention goals. The employer retains full control of the schedule, timing, and terms.

 

The vesting mechanic creates what are commonly called "golden handcuffs" — without permanently inflating payroll or committing to annual bonus renegotiations. The result is retention with structural integrity.

 

Scenario	Employee Outcome	Employer Outcome
Employee leaves early	Forfeits unvested benefit — no entitlement	Retains full unvested policy value; no payout obligation
Employee reaches tenure milestone	Vested share of benefit unlocks — incentive realized	Retention goal achieved; policy continues accumulating
Long-tenured employee (Year 20+)	Access to vested death benefit and/or tax-free income distributions	Cost recovery via policy loans begins; asset on balance sheet matures

 

The Question Every Employer Should Ask

Most employers who offer group life coverage have never questioned whether it is working as hard as it could. The standard answer — "we offer 1x or 2x salary" — satisfies a checkbox but misses the larger opportunity.

The better question is not whether you offer group life insurance. The question is whether your current benefits structure is:

 

Bottom Line Traditional group life insurance answers "none of the above." The Sky Gem Group IUL strategy is designed to answer "all of the above." The difference is not just in the policy type — it is in how the entire program is positioned, structured, and managed as a long-term financial strategy for your organization.

 

Next Steps

Implementing a Guaranteed Issue Group IUL program follows a straightforward process:

 

Disclaimer

This material is provided for informational and educational purposes only and does not constitute tax, legal, investment, or financial advice. The concepts and illustrations presented herein are hypothetical and are not intended to project or predict future results. Policy performance, interest rates, and lending terms are not guaranteed and are subject to change by the insurance carrier and/or lender. Underperformance could result in a lower death benefit, cash surrender value, projected annual income, and/or additional collateral requirements. Any tax strategy or planning involving life insurance or other complex structures should be reviewed with a qualified tax professional. Sky Gem Solutions Group LLC is a licensed insurance agency authorized solely to offer life insurance products and does not provide tax or legal advice. Prospective clients are strongly encouraged to consult their own qualified tax advisors, legal counsel, and investment professionals before making any decisions.

Sky Gem Solutions | contact@skygemsolutions.com | +1 (833) 4SKYGEM | 2255 Glades Road Suite 236W, Boca Raton, FL 33431 | www.skygemsolutions.com