Group Life Insurance Flashcards
The general rule for eligibility to sponsor a group insurance plan is the group must
Have been formed for a purpose other than obtaining group insurance for its members
Group insurance eligibility is limited to the following types of groups:
-single employer sponsored
-multiple employer trust (MET)
-labor unions
-association group plans
-group credits life insurance
Employer Group Plans
A group insurance plan sponsored for employees
A trust made up of multiple small employers in the same or similar industries that form to provide life insurance and other benefits for their employees while gaining tax benefits
Multiple Employer Trusts (MTEs)
Two or more labor unions may join together to provide group insurance for their collective members. Sponsored under a _____-______ _____
Taft-Hartley trust
Association group plans
A trade, professional, or other type of association may sponsor a group plan for its members
Two features that separate group credit insurance from other plans
-group credit insurance can be made payable to the sponsoring group
-the amount of coverage is limited to each individual insured’s remaining debt balance
One ______ _____ is issued to the sponsoring group and the applicant is the policyowner or policy holder. Could be an employer or the labor union
Master policy
Individual employee or member is not a party to the group insurance contract and instead receives a
Certificate of insurance
With a _____ employer group plan, the employee pays part of the premium
Contributory
If the employer pays the entire group plan premium own behalf of the employees, the plan is _____________
Noncontributory
At least __% of eligible employees must participate in a contributory plan
75%
___% of eligible employees must participate in a noncontributory plan
100%
Once the group life insurance plan is in force, premiums are based on..
…the experience of the group
Group life insurance usually renews…
…annually, and premiums can fluctuate year to year
Some underwriting considerations of group life insurance may include:
-stability of the group
-persistency of the group
-existence of the group
Stability of the group
Group does not have excessive employee turnover
Persistence of the group
Groups that change insurers every year may not represent a good risk
Existence of the group
Insurance purchase must be incidental to the group’s formation
Employers are allowed to determine which ______ of employees will be eligible for the plan
Classes
Employers may classify employees. Using almost any standard. The two most common are:
-full-time versus part-time
-years of service
Requires new employees to wait for a certain period of time before they can enroll in the plan. During this period they are not covered. Typically 1-12 months.
Probationary period
To avoid adverse selection, eligible employees must sign up within ___ days after the probationary period ends, called the enrollment period
31
If the employee declines coverage during the enrollment period and then decides later to enroll, the insurer may
Ask medical questions and require a medical exam
A drawback of group life insurance is that certificate holders and dependents lose their coverage if:
-the certificate holder leaves the employer
-the employer discontinues the plan
-the insurer does not renew the policy
Certificate holders and dependents must have the right to:
Convert their group coverage to an individual policy is they lose coverage
The following group conversion rules apply:
-conversions must be done within 31 days from the date coverage is lost
-converted policy must be permanent insurance, not term
-converted policy must provide the same coverage as the individual had under the group policy
-premium will be based on the insured’s attained age at time of conversion
-no proof of insurability is required
Credit group life insurance
-sponsored by lender
-lender is beneficiary
-usually no medical questions
-cheaper than individual policy
-insurance no greater than debt owed
-stops if debt is paid
Individual credit life insurance
-insured is usually policyowner
-assigned to lender
-death benefit can exceed the debt
-doesn’t stop when debt is paid
-can be more expensive than group
-usually requires medical questions
