Group Life Insurance

What are the standard provisions for Group Life Insurance policies?

- 31 day grace period - 2 year contest-ability period from date coverage took effect - Entire contract has policy and attached application - Individuals covered are issued certificates of coverage - Misstatement of age provision - Evidence of insurability must be provided if an individual enrolls for coverage after enrollment period - Conversion right - Insured's statements in application are representations - Facility of Payment

What are the differences between group insurance compared to individual insurance policies?

- A group plan is easier to qualify for - Employers use group plans because they cover more people than individual employee insurance plans - Unit cost for group insurance is less than individual - Enrollees do not have to provide evidence of insurability - Enrollees do not own the contract - Enrollees are not issued individual policies

What provisions does the policy face page stipulate?

- Age limits - Notice of a claim - Conversion

How does the employer determine who gets what benefit?

- Earnings Schedule - Job Title

Who does FEDGLI cover?

- Federal Employees - Federal Retirees - Their family members

Government Insurance

- Federal Employees' Group Insurance - Servicemembers' Group Life Insurance (SGLI) - Social Security - Unemployment Insurance

What are the types of group whole life insurance?

- Group Ordinary - Group paid-up - Group Universal life

What are the criteria for an association to qualify for group insurance?

- Organized into a group naturally for a purpose other than obtaining life insurance - Must be active for at least two years - Have a constitution and bylaws - Hold regular meetings at least annually - Have at least 100 members

What is included on the certificate's face page?

- The coverage effective date - Any dependents covered - The policy face amount

What are the requirements for group coverage?

- The master contracts must cover at least 10 individuals - Contract must be established by an eligible group, such as an employer or association - Coverage must be established for the benefit of the insured individuals - Individuals who will be covered do not have to undergo a medical exam - Premium rates are based on claims experience of the entire group - Master contract holder must pay at least a portion of the premiums

What are the requirements for a labor union to be eligible for group insurance?

-Organized into a group naturally - Have a constitution and bylaws - Coverage is for the benefit of the members, not the union itself

How many contracts are present in group life insurance?

1 - A master contract

What are the two types of group life insurance?

1. Noncontributory 2. Contributory

What is the conversion period for group to individual life insurance?

31 days after termination from group coverage - Means individual must apply for coverage within 31 days - Individual covered through conversion period

How long must a member been insured under the group contract to convert it from group to individual whole life coverage?

5 years?

What will the face amount of the coverage converted coverage be?

= to the group policy coverage less any new coverage purchased during conversion, or $10,000 (whichever is less)

What is SGLI NOT based on?

Age

What is the most common type of group life insurance?

Annual Renewable Term

Group Ordinary Plan

Any group plan that builds cash value.

What conditions must be met for an MET Trustee to be insured a master policy?

At least one of the following: 1. At least two employers in identical or similar fields must establish the trust 2. One or more labor unions or associations establish the fund

How much can each dependent be covered for?

Cannot be more than 50% of the insured's member's coverage

What does each individual employee or member receive to prove they are covered?

Certificate of Insurance

Group Paid-up Plan

Combines term and whole life insurance. The employer pays term, and the employee purchases a single-premium whole life

Credit Untions

Cooperative, member-owned depository financial institutions (i.e. credit unions) may also offer group insurance

Franchise or Wholesale Group Life Insurance

Covers members in a common group. - Used for groups smaller than the minimum

Group Credit Life

Covers the life of a debtor in event he or she dies before paying off a debt - Creditor owns policy and is the beneficiary, and the debtor plays premiums - Is equal to the amount of outstanding debt - Terminates coverage when debt is paid - Group credit policies must have at least 100 people - Limit on the amount of insurance per debtor

What is the rule for total disability under group coverage?

Disabled will be allowed to continue their group coverage for a maximum six months after onset of disability - The disabled insured must pay the premium, which will not change

Who is the policyowner of the group policy?

Each trustee, meaning employer

Group Universal Life

Employees pay a majority of the premiums and in term have some rights of ownership

Policy's face amount in a group paid-up plan

Employer Purchased term life + employee purchased whole life = face amount

True or False? Groups can exist for only obtaining insurance coverage

False - groups must exist for other reasons that obtaining insurance coverage

Federal Employees' Group Life Insurance (FEGLI)

Federal employees are automatically covered by basic life insurance unless coverage is decline. Premiums are automatically deducted from the insured's paycheck

Taft-Hartley Act

Forbids employers from directing money into the union for the sole intent of providing members with insurance - Why most unions do not provide group insurance

What happens if an individual dies during the conversion period?

Full death benefit will be paid regardless if there is an application for individual coverage

Master Policy

Group contract which is issued and owned by the group entity - policy owner receives the master policy

Contributory Group Life Insurance

Group members share the cost of coverage with the employer and must have at least 75% participation

Employee group

Individuals eligible for coverage under the group policy

What size groups are better for insurers?

Larger groups provide better loss projection

Certificate of Insurance

Lists the policy benefits and any named beneficiaries

Nonprofit Organizations

May provide group insurance to their members. I.E. Charities, foundations and religious organizations

Experience Rating

Method used to establish premiums for group plans members. It is based on the claims experience of the group

Employer groups

Most common group to obtain insurance coverage. - Employer is policy owner & issued the master contract - Group consists of employees (usually full time)

Who allows dependent coverage?

Most group policies except credit life

Do family groups established for buiyng life insurance qualify for group policies?

NO

Servicemembers' Group Life Insurance (SGLI)

Offers inexpensive group term life insurance for members of the army - Coverage offered in $50,000 amounts up to $400,000 - Have the option of converting term protection to permanent - Premiums are 65 cents for each $1,000 of coverage

Group Whole Life Insurance

Offers permanent protection for insured members under the group. The employer pays for the insurance portion of the policy, while the employee owns the cash value.

Conversion Option

Permits a member to convert group life coverage to an individual policy if they are fired by their employer, removed from the insured group, or the master contract is terminated. - Does not need evidence of insurability - Whole life premiums are based on attained age, and the face amount will be the same as under the group policy - Premiums will be higher

Annual Renewable Term Group Life Insurance

Policy is issued for one year and can be renewed without evidence of insurability at the discretion of the policy owner

How are group life plans taxed?

Premiums paid by the employee are not tax deductible, but the employer an deduct them as a business expense.

Credit Insurance

Provide group insurance protection on the lives of their debtors. This means that if a debtor dies of becomes disable prior to paying off their debt, the creditor receives the policy proceeds to compensate for the debt

Veterans' Group Life Insurance (VGLI)

Provides a maximum of $400,000 of group term life insurance for veterans

Multiple Employer Welfare Arrangement (MEWA)

Same as MET

Earnings Schedule

Sometimes used by employers to determine coverage. It is a chart where each level of salary corresponds to a certain amount of benefits

Who is covered under dependent coverage?

Spouse, children, dependent parents, other dependent individuals

What type of coverage is group insurance usually offered as?

Term Protection

Under Credit Insurance who owns the policy?

The Creditor (bank or lending institution). They are also the beneficiary

What is the maximum amount of credit insurance a creditor can have on a debtor?

The balance of their debt at any time

What happens if an employee under a group plan is terminated?

The cash value is forfeited

Who determines the benefits of group life policies?

The employer

Noncontributory Group Life Insurance

The employer pays the entire cost of premiums and must have 100% participation

How does a group life insurance policy get terminated?

The employer stops paying premiums > the insurance company notifies the employer the policy is cancelled > the employee notifies his employees

Who is the policyowner in group contracts?

The employer, association, labor union, trusteeship or any other eligible group

How is group life insurance underwritten?

The group is underwritten as a whole

Labor Unions

The labor union is the policy owner and holds the master contract

What is the difference between Franchise/Wholesale Group and regular group insurance

There is no master policy holder. A group entity sponsors a plan, and members pay premiums to the insurance company - Individuals receive own policy specific to them

Associations

These are groups such as alumni associations or professional associations.

What is the role of the policy owner?

To purchase and sponsor the group contract for his/her employees or members

Multiple Employer Trust (MET)

When several employers or labor unions form to reduce the taxes of providing employee benefits (i.e. life insurance)