Chapter 6 🥳

Blanket Life Insurance

Covers groups of people that are exposed to the same hazard, such as passengers on an airplane. No one is named on the policy, and certificates of coverage are not given out. Individuals are only covered for the specified common hazard.

Contributory Plan

a group insurance plan issued to an employer under which both the employer and employees contribute to the cost of the plan. Generally, 75% of the eligible employees must be insured in most states. The employees must contribute to the cost of the plan.

Franchise Insurance

a life or health insurance plan for covering groups of persons with individual policies uniform in provisions, although perhaps different in benefits. generally written for groups too small to qualify for regular group coverage. called wholesale insurance when the policy is life insurance.

Conversion Privilege

allows a policy owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Conversion may be affected at attained age. The insured does not have to prove insurability

Servicemembers' Group Life Insurance (SGLI)

provided up to $400,000 (in $50,000 increments) for full-time members of the armed services. The coverage provided is group term life insurance, and all active members are covered unless they choose otherwise.

Group Credit Life

set-up by banks, finance companies, etc., to provide that if the insured dies before a loan is repaid, the policy benefits will be used to settle the loan balance. Premiums for group credit life insurance are based on claims experience expense factors, not necessarily the borrower's age. The premiums are usually paid by the insured. A decreasing term policy is commonly used.

groups eligible to participate in group insurance

• Single employee groups (employer) • Multiple employee groups (employment-related) • Labor Unions • Trade Associations • Credit/Debit groups • Fraternal Organizations • Customer groups (such as credit union members) • Trustee Groups (Established by two or more employers or labor unions)

Determining Eligibility

A group life insurance plan must benefit at least 70% of all employees. Furthermore, at least 85% of all participating employees must not be key employees.

Retire Lives Reserve and Qualified Plans

(RLR) is a group life insurance product with the objective of providing continuing life insurance protection beyond retirement. annual renewable term and a reserve account that accumulates funds before retirement, used to pay premiums on the term insurance after tax-deductible contribution the contributions are not tax-deductible to employees. decision to buy a policy may be made by either the plan (employer) or the participant.

Group Insurance versus Individual Insurance 3. Policy type

Group life insurance is always considered temporary insurance. annually, renewable term fixed b. Individual insurance can be any of the previously discussed temporary or permanent insurance products. c. Whenever a person converts their group insurance to individual insurance, they are always converting temporary protection to permanent protection.

Proceeds For Group Life Insurance

Proceeds from a group life policy are tax-free if taken in a lump-sum. Proceeds taken in installments will be subject to taxes on the interest portion of the installments.

armed Forces and Federal Employees

The Federal Government provides life insurance coverage for those in the armed services and other federal employees.

Group Insurance versus Individual Insurance underwriting

a. Individual policy, the insured must prove they are insurable. b. In group insurance, the group must meet various criteria, but the insureds are not individually underwritten.

Family Servicemembers' Group Life Insurance Coverage (FSGLI)

is a component of the SGLI program. FSGLI provides coverage for spouses and children of Servicemembers insured under SGLI. Non- military spouses are covered automatically for $100,000 or the amount of the member's coverage, whichever is less. Premiums for spouse coverage are based on the spouse's age and amount of coverage. Dependent children covered for $10,000 each at no cost to the member.

Noncontributory Plan:

is an employee benefit plan under which the employer bears the full cost of the employees' benefits; in most states, the plan must cover 100% of eligible employees. The employees do not contribute to the cost of the plan.

Franchise Life Insurance

is used when participants are employees of a common employer companies. The employer/association/society is a sponsor of the plan and may or may not contribute to the premium payments. Unlike the employer's group plan, each individual is issued an individual policy. These are used by small groups who individually do not meet the state's minimum numbers required by law.

Master Policy

issued to the employer under a group plan; contains all the insuring clauses defining employee benefits. Individual employees receive individual certificates that outline highlights of the coverage. Policy that is given to the employer that covers all employees

Retire Lives Reserve and Qualified Plans. defined benefit plan,

the death benefit is part of the definite determinable benefit provided to the participant by the plan. Most importantly, the purchase of life insurance must be incidental to the primary purpose of providing retirement benefits under the plan.

Eligibility of Group Members - (employees)

• The employee must be full time and actively working. • If contributory, employees must approve of automatic payroll deduction. • New employee probationary period is usually 1 to 6 months. • The employee has 31 days during the enrollment period to sign up. Otherwise, they may need to provide evidence of insurability.

Incident of Ownership- Beneficiary Selection

employer is the contract owner they retain all rights of ownership except the right to name or change the beneficiary. it is the "certificate holder" (insured employee) who names the beneficiary, employee may name the employer as a beneficiary of the group life only if the employer has an insurable interest in the employee.

Beneficiary Selection

For example, an employer may have an insurable interest in a key executive with 20-years of experience. However, the employer probably does not have an insurable interest part-time clerk. In addition, in recent years, many insurers have been permitted by modifications of State laws to include an assignment provision in group life policies. Of course, any assignment MUST BE IN WRITING and be filed with the insurer.

Group Policy Termination

If the master policy is terminated, each individual member who has been insured for at least five years is permitted to convert to an individual policy, providing coverage up to the face value of the group policy.

Premiums For Group Life Insurance

Premiums paid by the employee for their group life insurance are not tax-deductible. Premiums paid by employers for group life insurance are tax-deductible a sole proprietor or partner may not deduct premiums for group life covering his life since he is not considered to be an employee. The cost of the first $50,000 of group term life is tax-exempt to an employee. The cost of coverage amounts above $50,000 may be taxable (as ordinary income) to the employee.

Veterans' Group Life Insurance & Federal (VGLI)

Veterans' Group Life Insurance (VGLI) provides for the conversion of Servicemembers' Group Life Insurance (SGLI) coverage to a renewable term policy of insurance protection after a servicemember's separation from service. Servicemembers and their spouse may be able to convert their SGLI or VGLI to permanent insurance through a commercial insurer without proving insurability.

Certificate of Insurance

a document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals. group insurance, the group (typically employer) is the policy owner The insureds (typically employees) receive a certificate of insurance instead of a policy.

Group Insurance versus Individual Insurance 4. Cost

a. Individual insurance policies are more expensive for the insurer purchase. b. Group insurance policies are substantially less expensive for much cheaper C. some cases, the employer or sponsor may pay a substantial portion or all of the premium cost for the group insurance policy.

Group Insurance versus Individual Insurance 2. Policy ownership

a. individual insurance, the insured is also the policy owner. b. With group insurance, the insured is rarely the policy owner. There is one master policy owned by the employer or plan sponsor. i. Employers or plan sponsors receive the master policy, and as such, are the policy owner or contract holder. ii. Employees or plan participants receive the certificates of insurance (not individual policies), and as such, are certificate holders.

Credit Policies

are designed to help the insured pay off a loan in the event they are disabled due to an accident or sickness or in the event they die. If disabled, the policy provides for monthly benefit payments equal to the monthly loan payments due. If the insured dies, the policy will pay a lump sum to the creditor... typically cannot exceed the amount of the loan

Blanket Health Policies

are issued to cover a group who may be exposed to the same risks, but the composition of the group (the individuals within the group) are continually changing. an airline or a bus company to cover its passengers or to a school to cover its students. No certificates of coverage are issued in a blanket health plan, as compared to group insurance.

Persistency:

persistency is the percentage of policies an insurer has in force after a specified period of time. Persistency negatively impacted by policies replaced by other insurers, canceled by the policy owner, or laps due to nonpayment. Companies with higher persistency are more stable and profitable persistency. aim for 80% persistency after three-years and 60% after five years. Meaning, 60% of the policies written five years ago should still be active.

Federal Employees Group Life Insurance (FEGLI)

provides group term life insurance for all other federal employees or civil service workers.

Conversion Period terminated employee

terminated employee may convert to an individual plan of insurance without proof of insurability within 31 days after termination. If death occurs during the conversion period (31 days) the death claim will be paid by the group policy.

Premiums For Group Life Insurance

Most employers will establish benefit schedules according to the following: • Earnings • Employment position • Flat benefit

Employer Responsibilities

The employer is responsible for the selection of group coverages, record keeping, and employee enrollment. The employer not permitted to discriminate, especially when the plan is noncontributory.