L&H&A Chapter 8

Section 1: Group Life Insurance

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Hank is covered by a group life insurance policy through work. If he is insured for $50,000, what is the maximum amount his wife can be insured for? a. $10,000 b. $25,000 c. $50,000 d. $100,000

The amount of coverage for each covered dependent cannot exceed 50% of the insured member's coverage. Therefore, Hank's wife can be insured for a maximum of $25,000. The correct answer is: $25,000

What is the name of the document provided to subscribers evidencing group life insurance coverage? a. Policy sheet b. Contract form c. Certificate of insurance d. Master contract

The certificate of insurance is the evidence of coverage provided to individuals covered under group life insurance. The correct answer is: Certificate of insurance

Tim's Toy Shop has gone bankrupt and needs to terminate all employees. Tim informs all employees of their right of conversion under the employer-sponsored group life plan. How many days are Tim's employees allotted to convert their group life coverage to individual coverage? a. 10 days b. 15 days c. 31 days d. 60 days

The conversion period is 31 days after termination from group coverage. This means the individual must apply for individual coverage within 31 days after the date of group coverage termination. The extension does not apply because Tim notified his employees of the conversion right. The correct answer is: 31 days

Conversion from a group policy to an individual policy must be made within a maximum of how many days of termination from the group coverage? a. 15 b. 30 c. 45 d. 60

The conversion period is limited to a maximum of 60 days from the date of group coverage termination. The correct answer is: 60

Which of the following statements is false regarding the conversion option for group life insurance policies? a. Converted coverage may be term or whole life, depending on the needs of the insured. b. The insured must receive a notice of their right to convert. c. The face amount of the converted coverage may be no more than that under the group coverage. d. Coverage during the conversion period is provided by the group policy.

The converted coverage must be whole life. The correct answer is: Converted coverage may be term or whole life, depending on the needs of the insured.

All of the following are true regarding the conversion option for group life insurance, EXCEPT: a. The insured is covered under the group policy during the conversion period. b. The face amount of the converted coverage is no more than the face amount under the group policy. c. The converted coverage may be term or whole life. d. The insured must be notified of their right to convert to individual coverage.

The converted coverage must be whole life. The correct answer is: The converted coverage may be term or whole life.

In most states, all group life insurance policies must adhere to the following legal requirements, EXCEPT: a. Group master life contracts must cover at least 10 individuals. b. Group life insurance must be established for the benefit of the insured individuals. c. Individuals applying for coverage have to undergo a medical examination. d. Premium rates are based on the claims experience of the entire group, not each individual.

A medical exam is not required by individuals applying for group life insurance coverage. The correct answer is: Individuals applying for coverage have to undergo a medical examination.

What type of group insurance plan allows the policyowner to pay the minimum amount of premium for anticipated claims and the insurer pays the excess? a. Minimum premium b. Retrospective premium c. Shared-funding d. Administrative Services Only (ASO)

A minimum premium agreement is made between the policyowner and the insurer in which the policyowner pays the minimum amount of premium for anticipated claims, and the insurer pays the excess. The correct answer is: Minimum premium

What type of group health insurance plan is self-funded, but an insurer processes the claims? a. Minimum premium b. Retrospective premium c. Shared-funding d. Administrative Services Only (ASO)

Administrative Services Only (ASO) option applies specifically to health insurance _ a group policy is self-funded, and an insurer is subcontracted to process claims. The correct answer is: Administrative Services Only (ASO)

All of the following helps reduce the likelihood of adverse selection in group insurance plans, EXCEPT: a. The groups exist naturally b. Member turnover c. Persistency d. Individuals do not have to undergo medical exams or provide proof of insurability

Adverse selection is reduced in group insurance for several reasons. First of all, the group exists naturally. This is crucial because groups that exist only for the purpose of obtaining insurance are more than likely to contain a large number of individuals who are sick or approaching death. Second, member turnover is favorable since younger people pose less of a risk than older people. Third, the persistency of the group, the ability to pay premiums and renew coverage, provides for continuous business with that group. The fact that individuals do not undergo medical exams or provide proof of insurability will increase the likelihood of adverse selection in group plans. The correct answer is: Individuals do not have to undergo medical exams or provide proof of insurability

All of the following statements are true about the waiting period for group insurance EXCEPT: a. The waiting period is called a probationary period. b. The probationary period usually is the first 90 days of employment. c. Groups with high turnover incur greater enrollment expense. d. The waiting period only applies to certain individuals in the group.

All Individuals who join a group must undergo a waiting period prior to being eligible for coverage under the group plan. This waiting period is called a probationary period. Probationary periods usually last for the first 90 days of employment. Every time new insureds enroll in a group policy, the insurer incurs enrollment costs. Furthermore, groups that have frequent turnover incur great enrollment expense. The correct answer is: The waiting period only applies to certain individuals in the group.

All of the following statements about group life insurance policy conversion privileges are false, EXCEPT: a. When an employee elects conversion, both permanent and term life insurance policies must be offered to the employee. b. If the employee elects conversion, but dies during the conversion period, neither the group life policy nor the converted policy will pay the death benefit. c. Regardless of whether the employee elects conversion, death during the conversion period is covered. d. Coverage during the conversion period requires the employee pay an additional _conversion period_ premium in order to receive death protection during the conversion period.

An employee insured under group life insurance will automatically be covered during the conversion period regardless of whether conversion is elected. The correct answer is: Regardless of whether the employee elects conversion, death during the conversion period is covered.

Which of the following is not a type of group life insurance? a. Credit b. Term c. Annuity d. Whole

Annuities are not life insurance. The correct answer is: Annuity

What is the term for the period before an individual is eligible for coverage under the group plan? a. Probationary period b. Eligibility period c. Elimination period d. Open enrollment period

Individuals who join a group insurance plan must undergo a waiting period or probationary period before being eligible for coverage under the plan. The correct answer is: Probationary period

What is the minimum participation rate of eligible employees for contributory plans? a. 100% b. 75% c. 50% d. 67%

Contributory group plans require at least 75% participation of the group's eligible employees. The correct answer is: 75%

What is the term for the period when an individual is eligible for coverage under a contributory plan and may enroll in the group plan? a. Probationary period b. Eligibility period c. Elimination period d. Open enrollment period

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. The correct answer is: Eligibility period

All of the following statements are false regarding issuance of group life insurance, EXCEPT: a. Employer-sponsored group life insurance is usually annual renewable term. b. An insured's dependents are typically not insurable under group life coverage. c. Group policies are always noncontributory. d. Evidence of insurability is required to renew coverage under group life insurance.

Dependents are typically insurable under group life coverage. Most often, group life is issued in the form of annual renewable term. The cost of coverage is usually shared between the insured and the policyowner, and evidence of insurability is not required to renew coverage under group life. The correct answer is: Employer-sponsored group life insurance is usually annual renewable term.

Unlike group life insurance, insureds under franchise plans each receive: a. Their own policy b. A master contract only c. A certificate of insurance only d. A master contract and certificate of insurance

Distinct from group insurance policies, individuals insured under franchise policies each receive their own individual policy. The correct answer is: Their own policy

All of the following statements are true of group life insurance contracts, EXCEPT: a. Insureds do not own the policy. b. The group must exist naturally. c. Enrollees must provide proof of insurability. d. Premiums are based on the claims experience of the group as a whole.

Enrollees in a group life insurance plan usually do not have to provide proof of insurability. The correct answer is: Enrollees must provide proof of insurability.

Which statement is false regarding the conversion option for group life insurance? a. The option to convert to an individual policy only applies to group policies. b. There is a 31-day period in which to convert to an individual policy. c. Evidence of insurability is required for conversion. d. If the insured dies during the conversion period, the death benefit is paid by the group policy, even if application for an individual policy has already been made.

Evidence of insurability cannot be required upon conversion. The correct answer is: Evidence of insurability is required for conversion

All of the following are true regarding group term life insurance, EXCEPT: a. Group life insurance is most often issued as guaranteed annual renewable term. b. The policy is issued for one year and may be renewed annually with evidence of insurability. c. Premiums may be raised at renewal d. Group term insurance may cover the insured's dependents, such as a spouse and children.

Evidence of insurability is not required to renew coverage. The correct answer is: The policy is issued for one year and may be renewed annually with evidence of insurability.

All of the following are true regarding group life insurance contracts, EXCEPT: a. They have a grace period. b. Members have the right to convert their policy. c. Evidence of insurability is never required for enrollment. d. The application may be attached to the policy.

Evidence of insurability must be provided if an eligible individual enrolls after the enrollment period. The correct answer is: Evidence of insurability is never required for enrollment.

All of the following are true of group life insurance policies, EXCEPT: a. Evidence of insurability must be provided when an eligible individual enrolls. b. Group life insurance policies must contain a conversion right. c. Group life insurance policies have a grace period of 31 days. d. Entire contract includes the policy and the application.

Evidence of insurability must be provided if an eligible individual for coverage enrolls after the enrollment period. The correct answer is: Evidence of insurability must be provided when an eligible individual enrolls.

Which of the following is life insurance that covers federal employees? a. Group life b. Group health c. SGLI d. FEGLI

FEGLI is the Federal Employees Group Life Insurance and provides coverage to federal employees, retirees, and their family members. The correct answer is: FEGLI

What is the minimum participation rate of eligible employees for non-contributory plans? a. 100% b. 75% c. 50% d. 67%

For noncontributory group plans, 100% of the group's eligible employees must participate in the group plan. The correct answer is: 100%

Wholesale insurance covers: a. Members in a common group b. Individuals c. The employer only d. None of the above

Franchise or wholesale insurance is group insurance that covers members in a common group. Unlike most group insurance, there is not a master policyholder for franchise insurance. Instead, a group entity sponsors a plan where members pay premiums to the insurance company. The correct answer is: Members in a common group

Which of the following classifications of employees is not used for the purpose of determining group insurance eligibility? a. Full-time or part-time/seasonal b. Salaried or hourly c. Union or non-union d. Age or gender

Insureds under a group policy are typically classified according to their employment status. By classifying employees, the employer decides which class/classes of employees are eligible for coverage. While employees can be classified by their job responsibilities, union or non-union status or department, employees may not be classified based on their sex or age. The correct answer is: Age or gender

All of the following statements regarding group insurance policies are correct, EXCEPT: a. Group insurance policies are underwritten on a group, not an individual basis. b. Applicants usually have to undergo a medical exam. c. Group insurance policies are typically cheaper than individual policies. d. Individuals may be classified based on full-time and part-time status or job responsibilities, but not age and gender.

Group insurance policies are written on a group basis, not an individual basis. For this reason, group policies are usually cheaper than individual policies. Additionally, individuals typically do not have to undergo a medical exam and do not have to show proof of insurability unless enrolling after the group enrollment period. The correct answer is: Applicants usually have to undergo a medical exam.

Group insurance plans in which the policyowner and the insured pay the premiums are called: a. Contributory plans b. Non-contributory plans c. Fully contributory plans d. Payee plans

Group insurance premiums may be paid solely by the policyowner or jointly by the policyowner and the insureds. Contributory plans are paid by both the policyowner and the insureds. This reduces adverse selection because the insureds share in the cost of premiums. Noncontributory plans are paid solely by the policyowner. The correct answer is: Contributory plans

Group insurance plans in which the policyowner pays all of the premiums are called: a. Contributory plans b. Non-contributory plans c. Fully contributory plans d. Payor plans

Group insurance premiums may be paid solely by the policyowner or jointly by the policyowner and the insureds. Contributory plans are paid by both the policyowner and the insureds. This reduces adverse selection because the insureds share in the cost of premiums. Noncontributory plans are paid solely by the policyowner. The correct answer is: Non-contributory plans

All of the following are standard provisions for group life insurance policies, EXCEPT: a. 10-day grace period b. Conversion to individual policy right c. Certificates of coverage are issued to insured members d. Evidence of insurability must be provided if any member enrolls after the enrollment period

Group life insurance policies have a standard grace period of 31 days. The correct answer is: 10-day grace period

Which of the following is not a standard provision for group life insurance policies? a. Right of conversion b. 5-day grace period c. Subscribers are issued certificates of coverage d. Members enrolling after the open enrollment period must provide evidence of insurability

Group life insurance policies have a standard grace period of 31 days. The correct answer is: 5-day grace period

How long must an individual have been insured under the group life insurance plan in order to be eligible for the conversion privilege? a. 6 months b. 12 months c. 5 years d. 10 years

Group members must have been insured under the group life insurance plan for at least five years to be eligible to convert their group coverage to individual coverage. The correct answer is: 5 years

Jacob has been insured under his employer-sponsored group life insurance plan for seven years. He becomes totally disabled upon termination of his group coverage. Which of the following is true? a. Jacob has 10 days to convert his policy after the date of termination from group coverage. b. Jacob has 20 days to convert his policy after the date of termination from group coverage. c. Jacob may only continue his coverage through OBRA. d. Jacob must be permitted to continue group coverage for six months.

Group members who become totally disabled will be allowed to continue their group coverage for a maximum of six months after the onset of the total disability. The premium will not change. The correct answer is: Jacob must be permitted to continue group coverage for six months.

In employer-sponsored group insurance, the employer is the _______________, and the employee is the _______________. a. Policyowner; insured b. Policyowner; beneficiary c. Insured; policyowner d. Insured; beneficiary

In employer-sponsored group insurance, the employer is the policyowner and the employee is the insured. The correct answer is: Policyowner; insured

Group insurance plans for non-employer groups in which the insured pays all the premiums are called: a. Contributory plans b. Non-contributory plans c. Fully contributory plans d. Payee plans

In group employer policies, employers must pay at least some portion of the premium. Non-employer groups in which the members are fully responsible for paying premiums and the group pays no part of the premiums are called fully contributory plans. The correct answer is: Fully contributory plans

Which of the following is not true about adverse selection in group insurance? a. The possibility of adverse selection is lower in group insurance. b. Seasonal employees are less likely to be insured than permanent employees. c. Younger people pose a great risk because of their lifestyles. d. Benefits must be pre-established.

Insurers actually prefer younger people, because they pose less risk than older people - who are more likely to have issues. The correct answer is: Younger people pose a great risk because of their lifestyles.

All of the following are true regarding the premiums for group life insurance, EXCEPT: a. Rates are based on the claims experience of the entire group. b. Rates are based on the claims experience of each individual. c. Premiums must be paid at least in part by the master contract holder. d. Premiums are often paid by both the master contract holder and insured individuals.

Premium rates for group life insurance are based on the group has a whole, not each individual. The correct answer is: Rates are based on the claims experience of each individual.

What type of group insurance plan allows the insurer to collect a base premium amount, but the insurer may collect additional premium amounts based on actual loss experience? a. Minimum premium b. Retrospective premium c. Shared-funding d. Administrative Services Only (ASO)

Retrospective premium allows the insurer to collect a base premium amount, but is entitled to collect additional premium amounts based on the actual loss experience. The correct answer is: Retrospective premium

What type of group health insurance plan is self-funded up to a specific amount, then the insurer covers the remaining costs? a. Minimum premium b. Retrospective premium c. Shared-funding d. Administrative Services Only (ASO)

Shared-funding is an agreement specific to health insurance. It allows the policyowner to self-fund its medical expenses, but after a specified amount the insurer will cover the remaining costs. The correct answer is: Shared-funding

Which of the following is the method for rating group insurance premiums based on the prior claim history of the group? a. Experience rating b. Community rating c. Group rating d. Claims rating

The experience rating establishes group premiums on the group's prior claims history. Experience rating more accurately rates the group; however, groups with more claims will inevitably pay higher premiums. The correct answer is: Experience rating

What is the grace period for group life insurance policies? a. 10 days b. 20 days c. 31 days d. 61 days

The grace period for group life insurance is 31 days. The correct answer is: 31 days

All of the following are standard provisions under a group life insurance policy, EXCEPT: a. Grace period of 61 days b. 2-year contestability period c. Entire contract consists of the policy and application d. Conversion right

The grace period under group life insurance policies is 31 days. The correct answer is: Grace period of 61 days

What is the term used to describe a group's ability to pay premiums and renew group coverage? a. Persistency b. Continuity c. Consistency d. Payability

The group's ability to pay premiums and renew coverage impacts policy issuance, called persistency. In the case of group employer plans, employers are required to pay at least some portion of the premiums; therefore, the group policies are likely to be kept in force. The correct answer is: Persistency

Eric dies 10 days after his employer-sponsored group life insurance coverage terminated, and he did not apply for individual coverage. Which statement is correct? a. Eric's beneficiary will not receive the death benefit. b. Eric's beneficiary will receive 50% of the death benefit. c. Eric's beneficiary will receive the full death benefit. d. None of the above

The insured is covered under the group policy during the conversion period. The full death benefit will be paid to Eric's beneficiary. The correct answer is: Eric's beneficiary will receive the full death benefit.

Serena dies 15 days after her group life insurance coverage is terminated. She did not apply for individual coverage. Which of the following is true? a. Serena's beneficiary will receive 50% of the death benefit. b. Serena's beneficiary will receive the full death benefit. c. Serena's beneficiary will receive the death benefit minus the initial premium for the converted coverage. d. Serena's beneficiary will not receive the death benefit because Serena's group coverage was terminated.

The insured is covered under the group policy during the conversion period. The full death benefit will be paid to Serena's beneficiary. The correct answer is: Serena's beneficiary will receive the full death benefit.

What is the term for the period where new members may enroll in a group plan and current members can change their coverage? a. Probationary period b. Eligibility period c. Elimination period d. Open enrollment period

The open enrollment period is the period of time new members may enroll in group coverage each year, and when members can change their coverage. New members that miss the open enrollment period may either be required to show evidence of insurability or wait until the following year's open enrollment period to enroll. The correct answer is: Open enrollment period

All of the following statements are true regarding the ownership of group life insurance policies, EXCEPT: a. Group contracts are between the insurer and the policyowner. b. The policyowner is the employer, association, labor union, trusteeship, or other type of eligible group. c. The policyowner purchases and is the sponsor of the group contract. d. The policyowner receives a certificate of coverage.

The policyowner receives the master policy, and each insured receives a certificate of coverage. The correct answer is: The policyowner receives a certificate of coverage.

What is the standard number of days allotted to an employee to convert their group life policy to an individual life policy? a. 15 b. 31 c. 46 d. 60

The standard conversion period is 31 days from the date of group coverage termination. The correct answer is: 31

Which of the following is the method for rating group insurance premiums based on the actual or projected costs of insureds in a particular geographic location based on the age, gender, and occupation of the insureds? a. Experience rating b. Community rating c. Group rating d. Claims rating

With community rating, premiums are based on the actual or projected costs of insureds in a particular geographic location with reference to insureds' age, gender, occupation and health. With community rating, each member pays the same premium. The correct answer is: Community rating