Ch. 13 Group Life Insurance

Policy Forms

5 Main Types of Group Life Insurance - Group Term Life - Group Permanent Life - Group Creditor Life - Group Paid up Life - Group Survivor Income Benefit Insurance

Group Conversion Option

Group life insurance policies must include a conversion privilege that gives insured members the right to convert to an individual policy upon termination of the master policy, upon the loss of group coverage due to termination of employment. - This option guarantees that coverage will continue for 31 days after leaving the group. The member can convert to any type of insurance except term insurance; the policy. premiums will be based on the attained age of the member. - No proof of insurability required. - If the master contract is terminated, every individual who has been covered under the plan for at least 5 years will be allowed to convert to individual plans. The conversion policy must have the same coverage amount as the group policy.

Noncontributory

If the employer pays the entire premium, the plan is noncontributory. In a noncontributory plan (non participating), the group contract must cover 100% of the eliglbe persons in the group.

Contributory Vs Noncontributory

These plans refers to which party or parties will pay for the group life insurance premiums.

Eligibility period

Under contributory plans, the period of time during which the employee may enroll and receive coverage without evidence of insurability

Dependent Coverage

Dependents may be any of the following: - The insureds spouse - The insureds children - The insureds dependent parents - Any person for whom dependency can be proven

Eligibility of Group members

Employers and insurers are allowed some latitude ins setting minimum eligibility requirements for employee participants. Ex. an employer might decide that employees must be full time workers and actively at work to be eligible to participate in a group plan. - A probationary period may be required for new employees, which means they must wait a certain period of time (usually one to six months) before they can enroll in the plan. - The probationary period is followed by the enrollment period: The time during which new employees can sign up for the group coverage. If the employee does not enroll in the plan during the enrollment period (typically 31 days), she may be required to provide evidence of insurability if she wants to enroll later. This is to protect the insurer against adverse selection.

Certificate of Insurance

In group insurance, the policy is evidence of a contract between the insurer and the employer or association (the policy owner). When an employee becomes covered by a group life plan, the employer, as the master policy owner, retains the life insurance policy. As proof of protection the employee receives a form that certifies the coverage, the benefits under the plan and the beneficiary name.

Standard provisions

Group Policy Standard Provisions: - Grace Period (usually 31 days) - Incontestability (usually one or two years after the policy becomes effective, two years from the insureds effective date of coverage) - Entire contract ( the application must be attached to and made part of contract) - Evidence of Insurability (individual insurability must be proven if the employee or member joins the plan after the enrollment period) - Misstatement of age (premium is adjusted to the correct age, under individual insurance benefits are adjusted) - Facility of payment (allows partial payment of policy proceeds to a close relative or friend if no beneficiary is named or living to cover final expense) - Conversion (the right to convert to an individual policy when the insureds coverage is terminated or the mate policy is terminated) - Individual certificates (issued as evidence of coverage) - Minimum number (a minimum number of group members is required)

Legal Requirements aka True Group

All states define a true group as having at least 10 people covered under one master contract. Group life insurance includes the following characteristics: - Insurance coverage must be included to the purpose of the group - Beneficiaries are covered under a master contract - Beneficiaries receive an individual certificate - Plans can be contributory or noncontributory - Beneficiaries are underwritten as a group - Beneficiaries have the right to conversation privileges. Examples of legally insurable groups include the following: - Single employer groups - Labor Unions - Trade Associations - Creditor and debtor groups - Fraternal organizations Group life insurance is generally issued without evidence of insurability being required by the individuals making up the group. The employer is the policy owner and pays the premium and receives the master contract. Most group life policies are written as a term insurance. The employee does not receive a policy and instead receives a CERTIFICATE OF COVERAGE that verifies that life insurance protection is in force

Contributory

if the employee pays part of the premium (the premium is shared by both the employer and employee), the plan is contributory. If the plan is contributory (participating), at least 75% of the eligible employees must be covered before the plan can become effective. Ex. If 500 employees are eligible for a contributory group plan, at least 375 would have to enroll in the plan for it to be effective.