Chapter 5- Group Insurance

Certificate of Insurance

A document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals. With group insurance, the group (typically employer) is the policy owner and maintains a master policy. The insureds (typically employees) receive this instead of a policy.

Contributory Plan

A group insurance plan issued to an employer under which both the employer and employees contribute to the cost of the plan. Generally, 75% of the eligible employees must be insured in most states. The employees must contribute to the cost of the plan.

Franchise Insurance

A life or health insurance plan for covering groups of persons with individual policies uniform in provisions, although perhaps different in benefits. Solicitation usually takes place in an employer's business with the employer's consent. It is generally written for groups too small to qualify for regular group coverage. May be called wholesale insurance when the policy is life insurance.

Conversion Privilege

Allows a policy owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. It may be affected at attained age (premiums based on the age attained at the time of conversion) or at original age (premiums based on the age of the insured at the time of original issue). It is a common privilege for term life insurance and all group insurance. The insured does not have to prove insurability (good health) when converting a policy.

Noncontributory Plan

An employee benefit plan under which the employer bears the full cost of the employees' benefits; in most states, the plan must cover 100% of eligible employees. The employees do not contribute to the cost of the plan.

Credit Policies

Designed to help the insured pay off a loan in the event they are disabled due to an accident or sickness or in the event they die. If the insured becomes disabled, the policy provides for monthly benefit payments equal to the monthly loan payments due. If the insured dies, the policy will pay a lump sum to the creditor to pay off the loan. It typically cannot exceed the amount of the loan, as that is the limit of the creditor's insurable interest in the insured(s).

Blanket Health Policies

Issued to cover a group who may be exposed to the same risks, but the composition of the group (the individuals within the group) are continually changing. It may be issued to an airline or a bus company to cover its passengers or to a school to cover its students. No certificates of coverage are issued as compared to group insurance.

Master policy

Issued to the employer under a group plan; contains all the insuring clauses defining employee benefits. Individual employees participating in the group plan receive individual certificates that outline highlights of the coverage.

Persistency

The percentage of policies an insurer has in force after a specified period of time. It is negatively impacted by policies replaced by other insurers, canceled by the policy owner, or laps due to nonpayment. Companies where this is higher are more stable and profitable than those that are lower. Generally speaking, companies aim for 80% of this after three-years and 60% after five years. Meaning, 60% of the policies written five years ago should still be active.