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 types of group whole life insurance?
- Group Ordinary - Group paid-up - Group Universal life
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
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
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
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
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
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
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
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
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)
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 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 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
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
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
True or False? Groups can exist for only obtaining insurance coverage
False - groups must exist for other reasons that obtaining insurance coverage
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
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.
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
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