Ch. 6 Flashcards
Blanket Health policies
Blanket health policies are issued to cover a group who may be exposed to the same risks, but the composition of the group (the individuals within the group) are continually changing. A blanket health plan may be issued to an airline or a bus company to cover its passengers or to a school to cover its students. No certificates of coverage are issued in a blanket health plan, as compared to group insurance
Certificate of Insurance
A certificate of insurance is a document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals. With group insurance, the group (typically the employer) is the policy owner and maintains a master policy. The insureds (typically employees) receive a certificate of insurance instead of a policy
Contributory plan
A contributory plan is a group insurance plan issued to an employer under which both the employer and employees contribute to the cost of the plan. Generally, 75% of the eligible employees must be insured in most states. The employees must contribute to the cost of the plan
Conversion privilege
The conversion privilege allows a policy owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Conversion may be affected at attained age (premiums based on the age attained at the time of conversion) or at original age (premiums based on the age of the insured at the time of original issue). Conversion is a common privilege for term life insurance and all group insurance. The insured does not have to prove insurability (good health) when converting a policy
Credit policies
Credit Policies are designed to help the insured pay off a loan in the event they are disabled due to an accident or sickness or in the event they die. If the insured becomes disabled, the policy provides for monthly benefit payments equal to the monthly loan payments due. If the insured dies, the policy will pay a lump sum to the creditor to pay off the loan. Credit policies typically cannot exceed the amount of the loan, as that is the limit of the creditor’s insurable interest in the insured(s)
Franchise insurance
Franchise insurance, also known as wholesale insurance, is a type of group insurance that provides coverage to members of a group or organization, typically small businesses or professional associations. Unlike traditional group insurance, where all members are covered under a single master policy, franchise insurance issues individual policies to each member, allowing for some customization of coverage.
The key benefits of franchise insurance include lower premiums due to group rates and the ability for individuals to tailor their policies to their specific needs. It’s often used by small businesses that may not qualify for larger group insurance plans but still want to provide their employees with some form of insurance coverage
Master Policy
The master policy is issued to the employer under a group plan; contains all the insuring clauses defining employee benefits. Individual employees participating in the group plan receive individual certificates that outline highlights of the coverage
Noncontributory plan
an employee benefit plan under which the employer bears the full cost of the employees’ benefits; in most states, the plan must cover 100% of eligible employees. The employees do not contribute to the cost of the plan
Persistency
As it pertains to insurance, persistency is the percentage of policies an insurer has in force after a specified period of time. Persistency is negatively impacted by policies replaced by other insurers, canceled by the policy owner, or laps due to nonpayment. Companies with higher persistency are more stable and profitable than those with lower persistency. Generally speaking, companies aim for 80% persistency after three-years and 60% after five years. Meaning, 60% of the policies written five years ago should still be active
Servicemembers’ Group Life Insurance (SGLI)
is provided up to $400,000 (in $50,000 increments) for full-time members of the armed services. The coverage provided is group term life insurance, and all active members are covered unless they choose otherwise
Family Servicemembers’ Group Life Insurance Coverage (FSGLI)
FSGLI provides coverage for spouses and children of Servicemembers insured under SGLI
Veterans’ Group Life Insurance (VGLI)
provides for the conversion of Servicemembers’ Group Life Insurance (SGLI) coverage to a renewable term policy of insurance protection after a servicemember’s separation from service
Federal Employees Group Life Insurance (FEGLI)
provides group term life insurance for all other federal employees or civil service workers
Premiums For Group Life Insurance
Premiums paid by employers for group life insurance are tax-deductible as a legitimate business expense as long as specific requirements are satisfied
Determining Eligibility for group life insurance
must benefit at least 70% of all employees. Furthermore, at least 85% of all participating employees must not be key employees
