Unit 8: Group Life Insurance Checkpoint Exam

Sam's Graphic Design and Amy's Floral Vision join together to form a trust to provide insurance to their employees. This type of group is called A) a multiple employer trust B) an association group C) a Taft-Hartley trust D) an employer group

A ) a multiple employer trust Explanation: A multiple employer trust (MET) is a trust made up of multiple small employers in the same or similar industries that form to provide life insurance or other benefits for its employees while gaining tax benefits.

If a group insurance policy is noncontributory, what percentage of employees must participate? A) 100% B) 50% C) 80% D) 75%

A) 100% Explanation: 100% of employees must participate in a noncontributory plan. 75% of employees must participate in a contributory plan.

What does an individual employee receive for evidence of her insurance coverage in a group policy? A) Certificate of insurance B) Master policy C) Contract D) Benefits contract

A) Certificate of insurance Explanation: One master policy is issued to the sponsoring group, and the applicant is the policyowner or policyholder. This could be an employer or the labor union. The individual employee or member is not a party to the insurance contract. Instead of getting a copy of the master policy, she receives a certificate of insurance as evidence of her coverage under the master policy.

A group plan in which the employer and employee both contribute to the premium and requires a minimum of 75% participation is referred to as A) a contributory plan B) a split plan C) a master plan D) a noncontributory plan

A) a contributory plan Explanation: At least 75% of eligible employees must participate in a contributory plan. If an employer has 200 eligible employees under a group insurance plan, at least 150 must enroll and pay their part of the premium for the employer to sponsor the plan.

With group credit life insurance plans, the amount of insurance is A) equal to the debt owed B) 125% of the debt owed C) 150% of the debt D) 80% of the debt owed

A) equal to the debt owed Explanation: For example, during the financing process, an individual may be offered credit life insurance in the amount of a car loan, and the cost will be included in the monthly car note. If the borrower dies, the lender (the beneficiary) will receive the amount of life insurance to pay off the outstanding debt.

A car manufacturer offers insurance to all of its employees. This type of group is called A) a multiple employer trust B) an employer group C) a Taft-Hartley trust D) an association group

B) an employer group Explanation: A group insurance plan sponsored for employees is sometimes referred to as an employee group plan.

Savannah starts her new job on January 1. She is NOT eligible for coverage until March 1. The period between her start date and eligibility date is known as A) the eligibility period B) the selection period C) the waiting period D) the probationary period

D) the probationary period Explanation: A probationary period requires new employees to wait for a certain period before they can enroll in the plan. During this period, they are not covered by the group insurance plan. Probationary period typically range from 1 to 12 months. The period is chosen by the employer and must apply to all eligible employees without discrimination.

Group insurance requires all of the following EXCEPT A) beneficiary information B) dependent information C) medical exams D) a short application form

C) medical exams Explanation: There are typically no medical questions; thus, no actual medical underwriting takes place. Therefore, it is possible for individuals with poor health to receive group insurance benefits.

Eligible employees of a contributory or noncontributory plan have how many days after the probationary period to sign up for their group insurance? A) 15 days B) 45 days C) 60 days D) 31 days

D) 31 days Explanation: To avoid adverse selection, eligible employees must sign up within 31 days after the probationary period ends, which is called the enrollment period. The employee can enroll without providing evidence of insurability; no medical questions or exams will be needed.

Which of the following is NOT a common underwriting consideration in group insurance? A) Stability of the group B) Persistency of the group C) Existence of the group D) Average age of the group

D) Average age of the group Explanation: Age is not considered during underwriting of group policies.

A converted policy must be A) convertible term insurance B) level term insurance C) renewable term insurance D) permanent insurance

D) permanent insurance Explanation: The converted policy must be permanent insurance, not term.