Chapter 8 Flashcards
Group life insurance
Blanket Health Policies
A blanket health policy, also known as blanket medical insurance, is a health insurance policy that covers a group of people for a specific purpose or period. Blanket health policies are often used for events and can cover groups of people such as:
Students
Travelers
Employees in specific industries, such as sports teams or construction companies
Participants in events or camps
Volunteer firefighters
Contributory Plan
Contributory insurance plans are plans in which employees contribute a portion of the premium payments while the employer pays the remaining. This differs from noncontributory plans, in which the employer pays the premium. Under a contributory plan, 75% of the eligible employees are required to be in the plan.
Conversion Privilege
A life insurance conversion privilege is a clause in a life insurance policy that allows the policyholder to change their policy from one type to another without undergoing a medical exam or other proof of insurability. This is a common option in the life insurance industry.
Credit Policies
Credit policies are designed to help repay loans if the insured becomes disabled or dies. In the event of disability, the policy provides monthly payments equal to the loan payments due. If the insured dies, a lump sum is paid to the creditor to cover the loan. These policies typically cannot exceed the loan amount, as that’s the limit of the creditor’s insurable interest.
Franchise Insurance
A franchise insurance policy is a type of business insurance that provides coverage for the specific needs of a franchised business. It typically covers liabilities related to property damage, personal injury, advertising, and product liability
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
A noncontributory plan is 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
The persistency ratio refers to the percentage of policyholders who pay their renewal premium. It is a benchmark for the quality of sales made by the insurer. Moreover, it highlights the commitment of a customer to renew the policy every year. The persistency ratio is measured at different stages.
Group policy termination
If the master policy is terminated, each individual member who has been insured for at least five years is permitted to convert to an individual policy, providing coverage up to the face value of the group policy.
Blanket Life Insurance
Covers groups of people that are exposed to the same hazard, such as passengers on an airplane. No one is named on the policy, and certificates of coverage are not given out. Individuals are only covered for the specified common hazard.
Premiums For Group Life Insurance
Premiums paid by the employee for their group life insurance are not tax-deductible.
Premiums paid by employers for group life insurance are tax-deductible as a legitimate business expense as long as specific requirements are satisfied.
Retired Lives Reserve (RLR)
Retired Lives Reserve (RLR) is a group life insurance product that provides continuing life insurance protection beyond retirement. RLR provides annual renewable term insurance and a reserve account that accumulates funds before retirement, which will be used to pay premiums on the term insurance after a person’s retirement. Under this plan, an employer can make a tax-deductible contribution to the fund (i.e., reserve account) on behalf of employees, and the contributions are not tax-deductible to employees.
Group Insurance Policy
A group insurance policy is a type of insurance plan that covers a group of people, such as employees, members of a professional association, or members of a society. Group insurance policies are often purchased by organizations, such as employers, unions, or associations, to provide benefits to their members.
