Life Insurance: Group Life Policies Flashcards
Definition:
Group Life Insurance
3 Parts
Group Life Insurance
- Provides coverage for more than 1 Individual using 1 contract
- Premiums are less expensive than an Individual Policy
- General Eligibility Rule - The group must have been formed for a purpose other than for obtaining group insurance for its members
What are the 5 Types of Group Life Insurance?
Group Life Insurance
- Employer Group Plans
- Multiple Employer Trust (MET)
- Labor Unions
- Association Group Plans
- Group Credit Life Insurance
Definition:
Employer Group Plans
3 Sub-Parts / 2 Types
Types of Group Life Insurance
A group insurance plan sponsored by the Employer (for its employees)
* Employer is the Policyowner
* Employee receives a certificate of insurance
* Employee names the Beneficiary
2 Types:
1. Single Employer Sponsored
2. Employer Sponsored Group Life
Definition:
Multiple Employer Trust
(MET)
3 Parts
Types of Group Life Insurance
- A Trust made up of multiple small employers (in the same/similar industry)
- Formed to provide Life Insurance (or other benefits) for their employees
- Receive certain tax benefits
Definition:
Labor Unions
2 Parts
Types of Group Life Insurance
- Two (or more) Labor Unions may join together to provide Group Insurance for their (collective) members
- Labor Union plans are sponsored under a “Taft-Hartley Trust”
Definition:
Association Group Plans
Types of Group Life Insurance
Professional or Trade Association’s are allowed to sponsor a Group Plan for its members
Definition:
Group Credit Life Insurance
2 Parts / 2 Sub-Parts
Types of Group Life Insurance
A Lender/Creditor may sponsor a Group Life Insurance Plan for its Debtors/Creditors
Features that are different from other plans:
1. Group Credit Insurance can be made payable to the Sponsoring Group
2. The amount of coverage is limited to each individual’s “remaining debt/credit balance”
Credit Life Insurance:
Group vs. Individual
5 Parts Each
Types of Group Life Insurance
Individual
* Insured is Policyowner (Assigned to Lender)
* Death benefit can exceed the Debt
* More expensive than Group
* Requires Medical Questions
* Coverage continues after Debt is paid
Group
* Sponsored by Lender (Lender is Beneficiary)
* No Medical Questions
* Cheaper than Individual Policy
* Coverage equal to Debt owed
* Coverage ends once Debt is paid
Definition:
Master Policy
2 Parts
Group Life Insurance
- The Master Policy Issued to the Sponsoring Group
- The Applicant is Policyowner
(i.e. the Employer or the Labor Union)
Definition:
Certificates of Insurance
3 Parts / 3 Sub-Parts
Group Life Insurance
Proof of Coverage (under the Master Policy)
Each Individual Employee/Member (named within the Group Insurance Contract) will receive a “Certificate of Insurance”
The Certificate of Insurance lists:
1. Summary of Benefits
2. The Individual’s Certificate #
3. The Individual’s named Beneficiary
What are the Differences?:
Contributory vs. Non-Contributory
2 Parts (Each)
Group Life Insurance
Contributory
* Employee pays part/all of the Premium
* 75% of eligible employees must enroll
Non-Contributory
* Employer pays all of the Premium
* 100% of eligible employees must enroll
Key Points:
Group Underwriting
4 Parts
Group Life Insurance
- Underwriter focuses on the group as a while (not the individual)
- Typically, No Medical Questions/Exams
- Premiums are based on the group (can fluctuate each year)
- Usually renews annually
What information is an Individual required
to provide to the Underwriter?
5 Parts
Group Life Insurance
- Their Name
- Their Address
- Their Social Security Number
- Dependent Information (Spouse, Kids, etc.)
- Beneficiary Designation
What are the 3 Primary
Underwriting Considerations?
Group Life Insurance
- Stability (No excessive employee turnover)
- Persistency (Group isn’t constantly changing Insurers)
- Existence (insurance must be incidental to the group’s formation)
Eligibility Requirements
(that employers are allowed to use)
3 Parts
Group Life Insurance
Most Common
1. Must be Full-Time (vs. Part-Time)
2. Must meet minimum # “Years of Service”
3. Must be in an Active Status (at time of enrollment)
Examples of “Inactive Status”:
* Disability
* Leave of Absence
* Other
Definition:
Probationary Period
3 Sub-Parts
Group Life Insurance
The Waiting Period (for new employees) before eligible for insurance plan
- Length of time is chosen by the Employer
- Must apply to all eligible employees (without discrimination)
- Typically: 1-12 Months
Definition:
Enrollment Period
(Contributory vs. Non-Contributory)
3 Parts
Group Life Insurance
- Directly follows the Probationary Period
- Usually lasts for 31 days
- Evidence of Insurability NOT Required
(no medical questions/exams needed)
- Contributory Plan - Employees decide if they want to participate
- Non-Contributory Plan - All eligible employees must be included
Common formulas used to determine
appropriate Coverage Amounts
3 Parts
Group Life Insurance
1. Percentage of Earnings
2. Class Coverage Limits
(Employees vs. Supervisors vs. Corporate Officers)
3. Dependent vs. Employee Coverage
(Coverage for dependents is usually less than coverage for employees)
Definition:
Conversion Privilege
Group Life Insurance
Certificate Holders (and their dependents) have the right to convert their Group coverage to an Individual Policy if they meet certain requirements.
Key Points:
Conversion Privilege
5 Parts
Group Life Insurance
- Conversion must be done within 31 days
- Converted to an Individual Permanent Policy
- Premium based upon attained age
- No Medical Questions/Exams
- Death (during 31-day period) covered by Group Plan
Eligibility:
Conversion Privilege
(Certificate Holder vs. Dependent)
3 Parts / 2 Parts
Group Life Insurance
Certificate Holders
* Leaves the employer
* Employer discontinues plan
* Insurer doesn’t renew policy
Dependents
* Certificate Holder dies
* Legally Divorced (from Certificate Holder)
