Group Life Insurance Flashcards
What is group life insurance?
Group life insurance provides coverage to multiple members of a group, such as employees of an organization, under a single master policy held by the group’s sponsor, typically issued as annually renewable term insurance.
What distinguishes group life insurance from individual life insurance?
Group life insurance doesn’t usually require evidence of insurability for coverage, and participants receive a certificate of insurance rather than an individual policy.
What is the master policy in group life insurance?
The master policy is the actual insurance contract issued to the group sponsor, who controls the policy, while individual members receive certificates of insurance.
What factors influence group life insurance underwriting?
Group underwriting considers the purpose of the group, its size, turnover, and financial strength, focusing on group characteristics rather than individual health profiles.
What is the conversion privilege in group life insurance?
The conversion privilege allows a group member to convert their coverage to an individual policy without proving insurability, typically within 31 days of leaving the group, with the new premium based on the individual’s current age.
What happens if an insured dies during the conversion period?
If an insured dies during the conversion period, the group policy must pay a death benefit equal to what the individual policy would have provided, even if the conversion was not completed.
How do contributory and noncontributory plans differ in group life insurance?
In a noncontributory plan, the employer pays all premiums and 100% employee participation is required. In a contributory plan, premiums are shared between employer and employees, requiring 75% participation.
What is required for an employee to convert group insurance to individual insurance?
For conversion, the employee doesn’t need to prove insurability; however, they must act within a specified period, usually 31 days after leaving the group, to convert to an individual policy.
How does the premium of converted individual life insurance compare to group life insurance?
The premium for converted individual life insurance is higher than the group rate and is calculated based on the individual’s attained age at the time of conversion.
What is the role of the Law of Large Numbers in group life insurance?
The Law of Large Numbers helps underwriters predict loss experience more accurately in group life insurance by analyzing a larger pool of individuals, leading to more stable and equitable premium rates.
What type of insurance is commonly used for group life insurance policies?
Group life insurance is commonly issued as annually renewable term insurance, providing coverage for a set period, usually one year, with renewal options.
How does group size affect group life insurance underwriting?
Larger group sizes allow for more accurate predictions of future loss experience, helping insurers set more stable and equitable premiums based on the Law of Large Numbers.
What is the significance of turnover in group life insurance underwriting?
A steady turnover in the group, with younger, lower-risk individuals joining and older, higher-risk individuals leaving, helps maintain a balanced risk profile and premium rates for the group.
Why is the financial strength of the group considered in underwriting group life insurance?
The financial strength of the group is important to ensure it can sustain premium payments and maintain the policy, especially given the administrative costs of group insurance.
What happens to group life insurance coverage when the master policy terminates?
If the master policy terminates, individuals who have been part of the plan for at least five years typically have the right to convert their coverage to individual permanent insurance.
