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18 Cards in this Set
- Front
- Back
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Group Life Insurance
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• A number of social and economic changes have
contributed to the development of group life insurance – Has led many employers to offer group life insurance as an employee benefit – Group insurance usually written as one-year term insurance |
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Legal Requirements pt. 1
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• Due to the National Association of Insurance
Commissioners (NAIC) Model Group Life Insurance bill, legal requirements of group insurance are uniform throughout the majority of states and include six basic characteristics • A true group defined as having at least 10 people covered under one master contract – Some states make allowance for even smaller groups – See your state law supplement for details regarding your specific state |
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Legal Requirements pt. 2
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• Coverage generally available without individual
medical examinations • Policy issued to the employer, union, or other type of association: certificates of insurance issued to the insured individual • Insurance must be obtained for the benefit of the covered employees or members and their dependents, not for the benefit of the employer, union, or other types of associations |
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Legal Requirements pt. 3
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• Premiums are based on the experience of the
group as a whole • Individuals covered under the plan are classified in such a way (usually by salary, position, or time on the job) that they do not choose the benefit levels |
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Contributory Versus Noncontributory pt. 1
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• The premium may be paid entirely by the
policyowner, i.e. sponsor, employer, or association, or it may be paid jointly by the policyowner and the insured – Sponsor is always required to pay some portion of the premium – Insureds are, by law, not permitted to contribute more than a specified amount |
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Contributory Versus Noncontributory pt. 2
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• Noncontributory plan
– Premium is paid entirely by the sponsor – All (100%) eligible employees or members must be covered • Contributory plan – Premium paid by both sponsor and insured – At least 75% of all eligible employees or members must be covered |
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Contributory Versus Noncontributory pt. 3
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• Eligible employees
– Refers to the eligible class of employees, such as fulltime employees, salaried workers as opposed to hourly workers, nonunion workers, and others – It is permissible to exclude certain groups of employees from the eligible class as long as these exclusions are based on some occupational criteria (i.e. part-time employees) |
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Standard Provisions pt. 1
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• Group insurance policies have special
provisions unique to group insurance – Some of these provisions, however, are the same as those found in policies of individual insurance • Group policies typically must contain provisions relating to – Grace period (usually 31 days) – Incontestability period (usually one or two years after policy becomes effective; usually two years from insured’s effective date of coverage) |
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Standard Provisions pt. 2
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Group policies (continued)
– Entire contract (application must be attached to and made part of the contract) – Representations (statements regarding the individual’s health are representations, not warranties) – Evidence of insurability (individual insurability must be proven if employee or member joins plan after the enrollment period) – Misstatement of age (premium is adjusted to the correct age; under individual insurance, benefits are adjusted) |
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Standard Provisions pt. 3
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• Group policies (continued)
– Facility of payment (allows payment of policy proceeds to a close relative or friend if no beneficiary is named or living) – Conversion (right to convert to an individual policy when insured’s coverage is terminated because of termination of employment or elimination of a class of insureds) – Termination of master policy (right to convert to an individual policy because master policy has been terminated) – Individual certificates (issued as evidence of coverage under a master policy) |
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Standard Provisions pt. 4
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• In addition to the rights of conversion listed, an
insured who dies after coverage has terminated but before the end of the 31-day conversion period will receive the group policy benefit |
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Certificates of Insurance pt. 1
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• In group insurance, the policy is evidence of a
contract between the insurer and the policyowner or sponsor (i.e. employer, association, etc.) – Policy purchased for the benefit of the individuals who are covered under the policy but is issued to the policyowner/sponsor – As policyowner, sponsor receives and retains the master policy – As proof of coverage, individuals/employees covered by a group life receive a certificate of insurance |
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Certificates of Insurance pt. 2
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• In group insurance, (continued)
– Certificate shows the important pertinent information, including • Amount of the life insurance protection • Name of the beneficiary • Coverage effective date • Additional details such as benefit descriptions, notice of claim, conversion rights, dependent coverage if applicable, etc. |
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Policy Forms pt. 1
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• Five main types of group life insurance are
marketed to eligible groups – Group term life – Group permanent life – Group creditor life – Group paid-up life – Group survivor income benefit insurance • Group insurance may also be written to include the dependents of the group members |
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Policy Forms pt. 2
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• Disadvantage of group life insurance is that it is
usually only temporary coverage; individual member may lose that coverage if the member leaves group – Many states require conversion provision options to help offset this disadvantage |
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Dependent Coverage
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• Many group policies allow for dependents of
employees who are insured under a group life plan to also be included • Where applicable, typically any other person dependent on the insured is eligible for coverage – Dependent children typically must be younger than a specified age (usually 19, or, if still attending school, age 21 or 23, or can be beyond specified age if child is permanently disabled) |
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Group Conversion Option pt. 1
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• By law in most states, any employee covered by
a group life insurance plan must be allowed to convert to an individual permanent life policy upon termination of employment • Common characteristics of conversion from a group include – No proof of insurability is required – Conversion must be to a whole life policy – Conversion must be applied for within one month of termination (usually 30 or 31 days) – Premiums for the new policy will be based on the insured’s attained age |
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Group Conversion Option pt. 2
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• As long as conversion requirements completed
in required time period (one month) coverage is automatically in force • Conversion privilege may also be used if employer discontinues group coverage – Same rules typically apply, except conversion must be made within one month of the policy’s cancellation rather than one month following the employee’s termination |
