Chapter 6- group life insurance

Question 1

Blanket health policies

Answer 1

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.
- 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, as compared to group insurance.

Question 2

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.

Answer 2

certificate of insurance

Question 3

employees are called ____

Answer 3

certificate holders

Question 4

employers are called ___

Answer 4

contract holders

Question 5

Contributory plan

Answer 5

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.

Question 6

The conversion privilege

Answer 6

allows a policy owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage.
- may be affected at attained age (premiums based on the age attained at the time of conversion) or at the original age (premiums based on the age of the insured at the time of original issue).

Question 7

___ 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.

Answer 7

Conversion

Question 8

Credit Policies

Answer 8

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.
- typically cannot exceed the amount of the loan, as that is the limit of the creditor’s insurable interest in the insured(s).

Question 9

credit polices:
- If the insured becomes disabled, the policy provides for ___ benefit payments equal to the ___

Answer 9

monthly benefit payments equal to the monthly loan payments due.

Question 10

credit policies:
- If the insured dies, the policy will pay ___

Answer 10

a lump sum to the creditor to pay off the loan.

Question 11

Franchise Insurance (This may be called wholesale insurance when the policy is life insurance)

Answer 11

a life or health insurance plan for covering groups of persons with individual policies uniform in provisions, although perhaps different in benefits.
- generally written for groups too small to qualify for regular group coverage

Question 12

___ usually takes place in an employer’s business with the employer’s consent.

Answer 12

Solicitation

Question 13

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.

Answer 13

master policy

Question 14

noncontributory plan

Answer 14

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.

Question 15

persistency

Answer 15

the percentage of policies an insurer has in force after a specified period of time
- negatively impacted by policies replaced by other insurers, canceled by the policy owner or laps due to nonpayment

Question 16

companies with higher persistency are:

Answer 16

more stable and profitable

Question 17

Companies aim for ___ persistency after three years and ___ after five years.

Answer 17

80%; 60%

Meaning, 60% of the policies written five years ago should still be active.

Question 18

there is no minimum ______ required for group life insurance

Answer 18

number of members

Question 19

types of eligible groups

Answer 19

• single employee groups
• multiple employee groups
• labor unions
• trade associations
• credit/debit groups
• fraternal organizations
• trustee groups (established by 2 or more employers or labor unions)

Question 20

dependent coverage

Answer 20

most group life insurance policies cover the member’s dependents, as long as the amount of coverage does not exceed 50% of the insured member’s coverage

Question 21

proceeds from a group life policy are ____

Answer 21

tax-free

Question 22

most employers will establish benefit schedules according to the following: (3)

Answer 22

• earnings
• employment position
• flat benefit

Question 23

group credit life

Answer 23

set up by banks, finance companies, etc. in case the insured dies before a loan is repaid

• policy benefits are paid to the creditor and used to settle the loan balance
• the premiums are paid by the borrower
• decreasing term policy

Question 24

conversion period

Answer 24

an individual must apply for individual coverage within 31 days after the date of group coverage termination
- an individual is covered under the group policy during this period

Question 25

eligibility of group members (employees):

• employee must be____ & ____
• if contributory, employees must approve of ___ ___ ___
• new employee probationary period is usually ________
• the employee has ___ days during the enrollment period to sign up, otherwise they may need to provide evidence of insurability

Answer 25

full-time and actively working; automatic payroll deduction; 1 to 6 months; 31 days