Unit 8 Group Life Insurance

Question 1

Types of Eligible Groups

1. ____ - A group insurance plan sponsored for employees is sometimes referred to as employee group plans
2. ____ - 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
3. ____ - Two or more ____s may join together to provide group insurance for their collective members. These plans are sponsored under a Taft-hartley Trust.
4. ____ - A trade, professional, or other type of association may sponsor a group plan for its members.
5. ____ - A lender or creditor may sponsor a group life insurance plan for its group of debtors. Payable to sponsoring group and coverage is limited to the remaining debt balance of each individual debtor.

Answer 1

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

Question 2

One ____ policy is issued to the sponsoring group and the applicant is the policyowner or policyholder. This could be the employer or the labor union. The individual employee or member is not a party to the group insurance contract - instead of getting a copy of the ____ policy, they receive a ____ as evidence of their coverage under the ____ policy.

Answer 2

Master Policy

Certificate of Insurance

Master

Master

Question 3

The Certificate of Insurance contains:

1. ____
2. ____
3. ____

Answer 3

1. Summary of the insured’s benefits under the plan
2. The individual’s certificate number
3. Beneficiary name

Question 4

With a ____ employer group plan, the employee pays part of the premium. If the employer pays the entire premium on behalf of the employees, the plan is ____.

Answer 4

Contributory
Noncontributory

Question 5

At least ____% of eligible employees must participate in a contributory plan. If an employer had 200 eligible employees under a group insurance plan, at least ____ must enroll and pay their part of the premium for the employer to sponsor the plan.

Answer 5

75%
200

Question 6

____% of eligible employees must participate in a non-contributory plan. The employer can sponsor the plan if the pay ____% of the premium and ____% of the eligible employees enroll.

Answer 6

100%
100%
100%

Question 7

Group Underwriting - do underwriters ask medical questions to individuals?

Answer 7

No

Question 8

Group Underwriting - Once the group plan is in force, premiums are based on the experience of the group. Group life insurance usually renews ____, and premiums can fluctuate from year to year.

Answer 8

Annually

Question 9

Group Underwriting considerations:
1. ____ of the group - group does not have excessive employee turnover.
2. ____ of the group - groups that change insurers every year may not represent a good risk
3. ____ of the group - insurance purchase must be incidental to the group’s formation

Answer 9

1. Stability
2. Persistency
3. Existence

Question 10

Employers need not include every employee in the plan, but they cannot choose which individuals will be covered and which will not. They are allowed to determine which ____ of employees will be eligible for the plan.

Employers may classify employees using almost any standard. The two most common are:
1. ____
2. ____

Another common requirement is that employees be on ____ status at the time they enroll in the plan (not on disability leave of absence or other inactive status).

Answer 10

Classes

1. Full-time VS part-time
2. Years of service

Active status

Question 11

A ____ period 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 by the group insurance plan. These periods usually range from ____ to ____ months. The time period is chosen by the employer and must apply to all eligible employees without discrimination.

Answer 11

Probationary Period

1-12 Months

Question 12

To avoid adverse selection, eligible employees must sign up within ____ days after the probationary period ends, called the ____ period.

If the employee declines coverage during this period and then decides later to enroll, the insurer may ask ____ and require a ____. Many plans do not allow “late enrollees” to enroll until the annual open enrollment period.

Answer 12

31 Days

Enrollment Period

Medical Questions

Medical Exam

Question 13

Employers and unions determine the amount of coverage their employees and members will receive from the group life insurance plan. The actual amount of coverage does not have to be the same. However, coverage must be based on a ____ that applies uniformly to all plan participants. Common formulas include:
1. ____ - Example: participating employees receive coverage equal to their earnings or half of their earnings or some other multiplier.
2. ____ - Example: employees receive 20k, supervisors receive 50k, and corporate officers receive 100k.

Answer 13

Formula

Percentage or multiple of earnings

Coverage limit per class of employees

Question 14

Eligible dependents may be provided with coverage under a group life insurance plan. Eligible dependents typically include:
1. ____
2. ____
3. ____
4. ____

Answer 14

1. Insured’s spouse
2. Insured’s children
3. Insured’s dependent parents
4. Other individuals dependent on the insured

Question 15

Conversion Privilege - Dependents lose their coverage if:
1. ____
2. ____
3. ____
4. ____
5. ____

Answer 15

1. The certificate holder leaves the employer
2. The employer discontinues the plan
3. The insurer does not renew the policy
4. The certificate holder dies
5. They are legally divorced from the certificate holder

Question 16

Conversion Privilege - Certificate holders AND dependents have the right to convert their group coverage to an individual policy. The following rules apply:
1. The conversion must be done within ____ days from the date coverage was lost
2. The converted policy must be ____ insurance
3. The converted policy must provide the ____ as the individual had under the group policy
4. The premium will be based on the insured’s ____ at the time of conversion
5. No ____ is required

Answer 16

1. 31 days
2. Permanent insurance
3. Same coverage amount
4. Attained age
5. Proof of insurability

Question 17

Conversion Privilege - Coverage continues through the conversion period (the ____ days following the loss of group coverage).

If the insured dies during that period, what happens?

Answer 17

31 days

The death benefit is paid as if the insured had decided to convert the group coverage to an individual policy

Question 18

Creditors sponsor ____ insurance plans for their borrowers as part of the loan transaction. The amount of insurance is equal to the debt owed. If the borrower dies, the lender, the beneficiary, will receive the amount of life insurance to pay off the outstanding debt.

Answer 18

Group Credit Life Insurance Plans

Question 19

Group Credit Life Insurance Plans - the same borrower could choose to purchase an individual policy and assign the death benefit to the lender.
Advantages:
1. ____
2. ____
Disadvantages:
1. ____
2. ____

Answer 19

Advantages:
1. The debtor is in control of the policy
2. The policy can continue in force even after the loan has been paid off
Disadvantages:
1. Higher premiums than group coverage
2. Evidence of insurability is required