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Life Insurance Notes > Chapter 8 > Flashcards

Chapter 8 Flashcards

1
Q

Individual life insurance provides coverage for one person; group life insurance, however, does what?

A

Provides coverage for many lives using one contract - resulting in lower premiums

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2
Q

Are group life insurance premiums generally less expensive than an individual policy?

A

Yes

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3
Q

What is the general rule to sponsor a group insurance plan?

A

the group must have been formed for a purpose other than obtaining group insurance for its members

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4
Q

What 5 types of groups is group insurance limited to?

A
  1. Employer Group Plans
  2. Multiple Employer Trusts (METs)
  3. Labor Unions
  4. Association Group Plans
  5. Group Credit Life insurance
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5
Q

What are employer group plans?

A

A group insurance plan sponsored for employees is sometimes referred to as employee group plans

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6
Q

What are multiple employer trusts?

A

A trust made up of multiple small employers in the same or similar industries that form to provide life insurance or other benefits for their employees while gaining tax benefits

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7
Q

What are labor unions?

A

Two or more labor unions may join together to provide group insurance for their collective members. Labor unions are sponsored under a Taft-Hartley Trust

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8
Q

What are Association Group Plans?

A

A trade, professional, or other type of association may sponsor a group plan for its members

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9
Q

What are credit life insurance plans?

A

A lender, or creditor, may sponsor a group life insurance plan for its group of debtors. Two features that separate group credit insurance from other plans:

(1) Group credit insurance can be made payable to the sponsoring group
(2) the amount of coverage is limited to the amount of each insured’s individual debt

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10
Q

With group policies, is one master policy issued to the sponsoring group and the applicant is the policyonwer or policyholder?

A

Yes

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11
Q

Who is the policyowner or policyholder?

A

An employee or labor union

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12
Q

Is the individual employee a party to the group insurance contract?

A

No

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13
Q

Instead of getting a copy of the master policy (because they are not a party to the group insurance contract) what does an individual member receive?

A

A certificate of insurance - as evidence of their coverage under the master policy

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14
Q

What does the certificate of insurance (provided to individual maembers) define?

A
  1. Benefits under the plan
  2. Individual’s certificate number
  3. Beneficiary’s name
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15
Q

The employee, a certificate holder, has the right to do what?

A

Name their beneficiary

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16
Q

The certificate of insurance is evidence of coverage for the individual member

A

Note - but the master policy is held by policyholder or applicant (the group)

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17
Q

With a contributory group plan, the employee does what?

A

Pays part of the premium

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18
Q

If the employer pays the entire premium on behalf of the employee, what is the plan referred to as?

A

Noncontributory

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19
Q

What percent of employees MUST participate in a contributory plan?

A

75%

20
Q

What percent of employees MUST participate in a noncontributory plan?

A

100% - the employer can sponsor the plan if they pay 100% of the premium and 100% of eligible employees enroll

21
Q

With group plans, the insurance underwriter focuses on the group as a whole, rather than its singular members. Each group participant is required to do what?

A

Complete a short form that usually consists of the individual’s name, address, SSN, dependent information, and beneficiary designation.

22
Q

Are there typically medical questions for group plan individuals?

A

No - thus, no medical underwriting takes place. It’s therefore possible for individuals with poor health to receive group insurance benefits

23
Q

What is the “enrollment period”

A

Employees must sign up for a (contributory) group plan within 31 days of the ending of a probationary period

24
Q

Can an employee enroll by providing evidence of insurability?

A

Yes - note, no medical exam is necessary (this is for group plans)

25
Q

If an employee declines coverage during an enrollment period, and then decides later to enroll, the insurer may do what?

A

Ask medical questions and require a medical exam

26
Q

If an employee misses enrollment, many plans don’t allow “late enrollees” to enroll until when?

A

The annual open enrollment period

27
Q

Does the enrollment period follow the probationary period?

A

Yes

28
Q

Do employers and unions determine the amount of coverage their employees will receive from the group life insurance plan?

A

Yes - the actual amount of coverage doesn’t have to be the same, however, the coverage must be based on a formula that applies to all plan participants

29
Q

What are some common formulas for determining the amount of coverage to apply to employees/union members?

A
  1. % or Multiple of earnings

2. Coverage Limit for different classes

30
Q

Is coverage for dependents of members of a group plan generally less than the limits established for employees?

A

Yes

31
Q

In addition to eligible employees, eligible dependents may also be provided with coverage under a group life insurance plan - what are some examples of dependents?

A
  1. Spouse
  2. Children
  3. Dependent Parents
  4. Other Individuals Financially Dependent on Insured
32
Q

Is dependent coverage typically a smaller amount than the employee?

A

Yes

33
Q

What is a drawback of group life insurance?

A

Dependents lose their coverage if one of a few things happens

34
Q

What are the 3 scenarios where a dependent can lose coverage in group life insurance?

A
  1. Certificate Holder Leaves Company
  2. Employer discontinues plan
  3. Insurer doesn’t renew policy
35
Q

How can dependents lose coverage from a group plan?

A
  1. Certificate Holder Dies

2. They are legally divorced from the certificate holder

36
Q

Due to the drawbacks of group life insurance, certificate holders and dependents must have the right to an individual policy if what occurs?

A
  1. Conversion must be done within 31 days from date coverage is lost
  2. Converted Policy must be permanent, not term
  3. Converted Policy must provide the same amount of coverage that the individual had under the group policy
  4. Premiums are based on attained age at the time of conversion
  5. No proof of insurability is required
37
Q

Must a converted policy be permanent, not term?

A

Yes

38
Q

Must a converted policy provide the same amount of coverage that the individual had under the group policy?

A

Yes

39
Q

Must premiums be based on attained ge at the time of conversion?

A

Yes

40
Q

Is proof of insurability required when converting from group to individual policy?

A

No

41
Q

Coverage continues through the conversion period (the 31 days following the loss of group coverage). If the insured dies during that period, the benefit is paid as if the insured had decided to convert the group coverage to an individual policy

A

Note

42
Q

Creditors sponsor group life insurance plans for their borrowers as part of the loan transaction - t/f?

A

True

43
Q

For creditor group life insurance, how much is the life insurance for?

A

The value of the debt owed - alternatively, the individual could purchase an individual policy and assign the death benefit to the creditor

44
Q

What are the advantages of an individual policy vs a creditor group life insurance?

A
  1. THe policyowner controls the policy, the lender owns/controls the group policy
  2. The policy can continue even after the debt/loan has been paid off
45
Q

What are the disadvantages of an individual policy vs a creditor group life insurance policy?

A
  1. Individual Policy can be a higher premium than group coverage
  2. evidence of insurability is required for individual policies
46
Q

If two or more labor unions get together to provide coverage, what is that called?

A

A Taft Hartlay Trust

47
Q

In group insurance, the sponsoring group is issued a “master policy” t/f?

A

True

Life Insurance Notes (12 decks)

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