Chapter 6: Group Life Insurance

Other forms of group life insurance

-Franchise life insurance -group credit life -blanket life insurance

Taxation of Group Life plans

-the premiums that an employer pays for life insurance on their employees are tax deductible to the employer as a business expense -anytime a business is the named beneficiary of a life insurance policy, or has a beneficial interest in the policy, any premiums that the business pays for such insurance are not tax deductible

Blanket Life Insurance

covers a group of people exposed to a common hazard -covered only for specific hazards stated in the policy

Which of the following is an important underwriting principle of group life insurance?

everyone must be covered in the group

Underwriting for group insurance

group underwriting differs from that of individual insurance -evidence of insurability is usually not required of each participant unless he or she is enrolling for coverage outside the normal enrollment period -instead the underwriting of group insurance is based on various group characteristices

Eligible Groups

may be sponsored by employers, credit unions, labor unions, associations, and any other organization formed for a reason other than purchasing insurance -insurance companies may establish a required minimum number of persons to be insured under a group plan -if the employer pays all premiums for a group life policy, all employees must be included in the plan, unless they are individually uninsurable according to the insurer, or they refuse coverage in writing

Group Life Insurance

plan that provides coverage to more than one person, under one policy -usually written for employee-employer groups -usually written annually, renewable term insurance -evidence of insurability is usually not required if participant enrolls during the open enrollment period, and participants under the plan do not receive a policy, nor do they own or control the policy. Instead they receive certificates, indicating that they are included in the coverage

Group Credit Life

type of decreasing term insurance issued to creditors to cover the lives of people who have outstanding loans

Group insurance cost

-based on the average age of the group and the ratio of men to women

-when a business pays the premiums for any of the following arrangements, the premiums are not deductible

-key employee insurance -stock redemption or entity purchase agreement -split dollar insurance

Features of Group Insurance

-normally choosen by employees company -group life policies must contain a conversion provision that allows individual insured members to convert to an individual plan without evidence of insurability. -most group conversion provisions require that the conversion be made to a whole life policy, as opposed to a term policy

Other Rules That Apply to Conversion

-the death of the policy owner -termination of the master policy -disability of the policy owner

Noncontributory

Noncontributory: when an employer pays all of the premiums, the plan is referred to as a non-contributory plan -under a non contributory plan, insurance companys will require that 100% of the eligible employees be included in the plan

Contributory

When the premiums for group insurance are shared between the employer and employees -Under a contributory plan, an insurance company will require that 75% of eligible employees be included in the plan

Which of the following statements about noncontributory employee group life insurance is FALSE a. a minimum number of employees is required to participate b. all eligible employees must be covered c. no evidence of insurability required d. must have conversion rights

a. a minimum number of employees is required to participate

What type of group insurance plan involves employees sharing the cost? a. contributory plan b. non-contributory plan c. qualified plan d. non-qualified plan

a. contributory plan

An employee of 20 years recently retired at age 59 1/2. this employees group life contract can be a. converted to an individual permanent policy at an individual rate b. converted to an individual permanent policy at a group rate c. continued at an individual rate d. continued at a group rate

a. converted to an individual permanent policy at an individual rate

Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees a. portion of the premiums paid for by the employer may be a tax deduction b. portion of the premiums paid for by the employee may be a tax deduction c. portion of the death proceeds are taxable to the beneficiary d. portion of the death proceeds are taxable to the estate

a. portion of the premiums paid for by the employer may be a tax deduction

Group life insurance policies are generally written as a. a term rider b. annually renewable term c. increasing term d. group whole life

b. annually renewable term

Under a trustee group life policy, who would be eligible for a certificate of coverage? a. corporation b. employee c. employer d. labor union

b. employee

An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to? a. $25,000 modfied whole life policy b. 25,000 individual term life policy c. 25,000 individual whole life policy

c