Nc Life Insurance Terms

Front 1

General Characteristics

Back 1

Enrollees Typically:

Do not have to provide evidence of insurability

Are not issued individual policies

Do not own the contract

Front 2

Legal Requirements

Back 2

All group life insurance policies must meet these:

*Must cover at least 10 individuals;

*Be established by an eligible group, such as an employer or an association;

*Be established for the benefit of the members;

*Individuals applying for coverage do not have to undergo a medical exam;

*Premium rates are based on the claims experience of the entire group, not each individual, and the master contract holder must pay for at least a portion of the premiums, but is permitted to pay the entire cost of premiums.

Front 3

Standard Provisions

Back 3

Most group life policies have the following standard provisions:

* Grace period of 31 days

* One or two year incontestability period from the date the insureWd's coverage took effect

* The entire contract consists of the policy and attached application

* Individual employees or members are issued certificates of coverage under the master contract

* Misstatement of age provision

* Evidence of insurability must be provided if an eligible individual for coverage enrolls after the enrollment period

* Conversion right

* Insured's statements in application are representations

* Facility of payment

Front 4

Eligible Groups

Back 4

Most states specify what types of groups may legally purchase group insurance. Some common groups include: employer, associations, labor unions, credit unions.

Front 5

Certificate of Insurance

Back 5

The policy owner receives the master policy, and each individual employee or member receives a certificate of insurance as evidence of coverage.

Front 6

Underwriting Considerations

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Group coverage important considerations:

* Underwritten as a whole within the group, not individually.

* Selected and rated based on group's average age, proportion of men to women and occupation.

* Insured's under a group policy are typically classified according to their employment (e.g. full-time, part-time, seasonal, salaried, etc.) Typically only full-time employees are eligible.

Individual policies insured's are classified individually, according to the degree of risk the insurer assumes (e.g. preferred, standard, substandard, etc.)

* Applications are brief and include: name, social security number, residential address, dependents, and named beneficiaries.

* Applicants usually do no have to undergo medical exams. Individual policies often have to undergo medical exams.

* Group size- larger groups provide better loss predictions.

* Constant flow of members joining and leaving the group is desirable for insurers since younger members pose a lower risk than older members.

* Persistency- groups ability to pay premiums and renew coverage impacts policy issuance. Employers are required to pay at least some portion of premiums so the group policies are likely to be kept in force.

* Each individual enrollee does not have to prove evidence of insurability unless enrolling after the group enrollment period.

Front 7

Adverse Selection

Back 7

Adverse Selection is reduced in group insurance for several reasons.

* The group exists naturally, this is crucial because groups that exist only for the purpose of obtaining insurance are more likely to contain a large number of individuals who are sick or approaching death. These individuals increase adverse selection. Groups can further reduce adverse selection by assuring that as many individuals as possible are eligible for coverage ( the law of large numbers applies here). Benefits must be pre-established so that poor risks do not seek out more insurance coverage.

Front 8

Contributory

Back 8

is where the premiums are paid jointly by the policy owner and insured. Contributory plans require 75% participation of the groups eligible employees.

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Noncontributory

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is where the premiums are paid entirely by the policy holder. Noncontributory plans require 100% of the groups eligible employees to participate.

Front 10

Probationary Period

Back 10

A waiting period to be eligible for coverage under a group plan (individually)

Front 11

Eligibility Period

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Noncontributory Plans- must cover all eligible individuals immediately after the probationary period ends.

Contributory Plans- require eligible individuals to satisfy the probationary period and enroll in the group plan during the eligibility period, spanning a period of 30 or 31 days.

Front 12

Open Enrollment Period

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the period of time new members may enroll in group coverage each year. New members who miss open enrollment must wait until the next open enrollment period.

Front 13

Group Term Life

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is most commonly offered as guaranteed annual renewable term. Policy is issued for one year and may be renewed annually without evidence of insurability at the discretion of the policy owner.

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Group Whole Life

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Though less frequently used, group whole life offers permanent protection for insured members under the group.

Front 15

Dependent Coverage

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Most group life insurance policies cover the member's dependents, as long as the amount of coverage does not exceed 50% of the insured members coverage.

Front 16

Conversion to Individual Policy

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If a member's coverage is terminated, the member and his dependents may convert their group coverage to individual whole life coverage, without having to show proof of insurability.

Front 17

Conversion Periodd

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An individual must apply for individual coverage within 31 days after the date of group coverage termination. An individual is covered under the group policy during the conversion period.

Front 18

Group Policy Termination

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If the master policy is terminated, each individual member who has been insured for at least 5 years is permitted to convert to an individual policy, providing coverage equal to the face value of the group policy.

Front 19

Rules for Total Disability

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If a group policy requires members to be active, it will only provide coverage to totally disabled individuals for 6 months after the disablement.

Front 20

Government Group Life Insurance

Back 20

FEGLI ( The Federal Employees' Group Life Insurance- offers group term life for federal employees, retirees, and their family members

SGLI (Service members Group Life Insurance)- offers inexpensive group life for members of the armed forces.