Chapter 5 - Group Insurance

Question 1

Group Life Insurance

Answer 1

• a type of term life insurance that covers a group of people under a single policy contract
• Typically offered by a large association/entity for its workers
• payments will be deducted from employee paychecks
• most often written as a annual renewable term policy

Question 2

Who is the policy owner in a group life policy plan?

Answer 2

the employer or plan sponser

Question 3

What do employees receive when they are part of a group policy plan?

Answer 3

certificate of coverage

Question 4

Who receives the master policy in a group insurance policy?

Answer 4

the employer/plan sponser

Question 5

What is the difference between group insurance underwriting and individual insurance underwriting?

Answer 5

• in an individual policy, the insured must prove they are insurable
• in group insurance the group must meet criteria, but the insureds are not individually underwritten.

Question 6

What is the difference between group insurance policy ownership and individual insurance policy ownership?

Answer 6

• with individual insurance, the insured is the policy owner
• with group insurance there is one master policy owned by the employer or plan sponsor.

Question 7

Is group insurance temporary or permanent?

Answer 7

• group insurance is always considered temporary
  -typically renewable term/annually

Question 8

Is group insurance of individual insurance more expensive for the insurer to issue?

Answer 8

• individual insurance polices are more expensive for the insurer to issue (underwrite, commission, billing, maintenance, etc.

Question 9

Noncontributory Plan

Answer 9

• the employer pays the entire cost of the plan, no payments for employees.
• the insurance company requires that 100% of eligible employees participate.
• helps the insurer avoid adverse selection.

Question 10

Contributory Plan

Answer 10

• plan in which employees share the cost, contribute to premium payments.
• the insurance company requires at least 75% of all eligible employees participate.

Question 11

Can anyone form a group to get group insurance?

Answer 11

• a group of people cannot form an organization whose primary purpose is to secure insurance coverage for the group.

Question 12

what are the eligibility requirements of employees to receive group insurance benefits?

Answer 12

• the employee must be full time/actively working
• if contributory, employees must approve the automatic payroll deductions
• new employee probationary period is 1 to 6 months
• the employee has 31 days during the enrollment period to sign up.

Question 13

Adverse Selection

Answer 13

• anti-selection, the tendency or danger of an insurer to write (approve) more bad risks than acceptable risks.
• people with more significant risk tend to seek insurance coverage more than those with little risk.

Question 14

Will group life plans exclude employees with a physical impairment?

Answer 14

• group life plan will not exclude employees with a physical impairment from the group life plan.

Question 15

Persistency

Answer 15

• the percentage of active policies in force, without lapsing or being replaced by policies of other insurers.
• insurers may assess persistency periodically

Question 16

Conversion Privilege

Answer 16

• a covered employee has the option of converting his/her group term coverage to his/her own individual plan upon termination from the company.
• no medical exam or other proof of insurability is required to convert coverage to an individual policy.

Question 17

How long is the Conversion Period?

Answer 17

• the period of time during which the terminated employee may convert to an individual plan of insurance with out proof of insurability is within 31 days after termination.
• individual is covered under the group policy during the conversion period.

Question 18

What happen if the Group Policy is terminated?

Answer 18

• if the master policy is terminated, each individual member who has been insured for at least fiver years is permitted to convert to an individual policy providing coverage up to the face value of the group policy.

Question 19

who names the beneficiary in a group policy plan?

Answer 19

• the employee/certificate holder names the beneficiary

Question 20

Servicemembers Group Life Insurance (SGLI)

Answer 20

• 400,000 for full time members of the armed services
• group term life insurance
• all active members covered

Question 21

Family Servicemembers Group Life Insurance (FSGLI)

Answer 21

• part of SGLI
• provides coverage for spouses and children of servicemembers insured under SGLI.
• non-military spouses covered for 100,000 or the amount of the members coverage, whichever is less.
• premiums for spouse coverage are based on spouses age/amount of coverage.
• dependent children are covered for 10,000 each at no cost to the member.

Question 22

Veteran’s Group Life Insurance & Federal (VGLI)

Answer 22

• provides for the conversion of SGLI coverage to a renewable term policy of insurance protection after servicemember’s separation from service.

Question 23

Federal Employees Group Life Insurance (FEGLI)

Answer 23

• provides group term life insurance for all other federal employees or civil service workers

Question 24

Franchise Life Insurance

Answer 24

• used when particpants are employees of a common employer or are members of a common association/society.

Question 25

Group Credit Life

Answer 25

• set up by banks/finance companies to provide that if the insured dies before a loan is repaid, the policy benefits will be used to settle the loan balance.
• decreasing term policy is used.

Question 26

Blanket Life Insurance

Answer 26

• covers groups of people that are exposed to the same hazard
• no one is named on the policy
  -certificates of coverage are not given out
  ex: passengers on an airplane

Question 27

How to determine eligibility of a group life insurance plan?

Answer 27

• a group life insurance plan must benefit at least 70% of all employees.
• 85% of all participating employees must not be “key” employees