Attracting & Retaining Key Employees: Life Insurance

Related Information

• Key Employee Retention Option Grid (PDF)

What is it?

Employee incentives, such as life insurance, provide business owners an opportunity to offer a select group of key employees' retirement and survivor benefits beyond what is provided as part of the company's standard benefits offering. These incentives can make the difference between keeping and losing employees who are critical to your business' success.

How is life insurance used?

Life insurance, when used as part of an employee incentive plan, can provide a death benefit payable to a beneficiary in the event of the employee's death. In addition, depending on the type of life insurance used, the employee may be able to draw upon the cash value through loans or partial surrenders from the life insurance policy to help supplement his or her retirement.¹ Even with some life insurance policies, there's no guarantee the cash value will be there, or sufficient to supplement their income. While the policy may allow for access to the cash value in the short-term, such as through loans or partial surrenders, these transactions will impact the policy's death benefit if the values are not restored prior to the insured's death. You should know that there may be little to no cash value available for loans in the policy's early years.

What are the benefits of life insurance?

The simplicity of utilizing life insurance in a plan, the potential income tax deduction for the business, and the degree of control that the business owner gives to the employee all combine to make life insurance an attractive employee incentive option.

What are the different types of life insurance products and solutions that can help in attracting and retaining key employees?

• Executive Group Life Insurance
  Executive Group Life Insurance is employer-sponsored group life insurance designed with the specific needs of executives and other senior professionals in mind.

• Universal Life Insurance
  Universal life insurance provides lifetime death benefit protection along with flexibility that gives your employees choices as their needs and finances change. It offers options such as coverage amounts that may be increased or decreased, and premiums that can vary based on individual finances.

• Variable Universal Life Insurance²
  Variable universal life insurance is a flexible premium, permanent insurance product combining death benefit protection with the option to allocate net premiums among divisions of the Separate Account and Guaranteed Principal Account.

• Whole Life Insurance
  Whole life insurance provides protection for a lifetime. It offers guarantees that you can’t find in other forms of life insurance, including guaranteed premiums that will not increase, a guaranteed death benefit and guaranteed cash value growth providing the premiums are paid on time and meet all requirements.

Prefer to speak to someone about life insurance?

• Talk to a Financial Professional

¹Distributions under your policy (including cash dividends, withdrawals and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (your cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to 10% tax penalty. Access to cash values through borrowing or partial surrenders can reduce the policy's cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.

²Variable life insurance policies are sold by prospectus. Before purchasing a variable life insurance policy, investors should carefully consider the investment objectives, risks, charges and expenses of the variable life insurance policy and its underlying investment choices. For this and other information, obtain the prospectuses for the variable life insurance policy and its underlying investment choices from your registered representative or click here for our financial documents. Please read the prospectuses carefully before investing or sending money.

The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.