Chapter 7 Group Life Insurance

When a business pays the premiums for any of the following arrangements, the premiums are NOT deductible.

1. Key Employee Insurance, 2. Stock Redemption or Entity Purchase Agreement, 3. Split Dollar Insurance

Group Life Insurance

Plan that provides coverage to more than one person under one policy

Group Credit Life

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

What is the rule under non-contributory plan?

Insurance companies will require that 100% of the eligible employees be included in the plan.

Other rules that apply to conversion?

1. Death of the policy owner, 2. Termination of the master policy, 3. Disability of the policy owner

Is insurability required for group life insurance?

No. It 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.

If 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 they tax deductible?

No. They are NOT used as a tax deduction.

What does the underwriter base the cost of coverage on for group life?

The cost of coverage is based on the average age of the group of employees and the ratio of men and women.

What do the participants receive indicating that they are included in the coverage?

They receive certificate.

Group Life Characteristics

Group underwriting differs from that of individual insurance.

What does the insurance company require for a contributory plan?

Insurance company requires that 75% of eligible employees be included in the plan.

Other Forms of Group Life Insurance

Franchaise, Group Credit, Blanket LIfe

What must a group life policy contain?

Conversion provision that allows individual insured members to convert to an individual plan with out evidence of insurability.

Blanket Life Insurance

Covers a group of people exposed to a common hazard.

Whose Group Life Insurance written for?

Employer-Employee Groups

Is evidence of insurability required for Group Life?

It is usually NOT required of each participant unless he or she is enrolling for coverage outside the normal enrollment periods.

Does most group conversion provisions require that the conversion be made to a whole life policy, as opposed to a term policy?

Yes.

Is the premiums that an employer pays for group insurance tax deductible?

Yes. The Employer can use it as a business expense for tax deduction.

Non-Contributory

When an employer pays all of the premium the plan is referred to as non-contributory.

How is Group Life Insurance written as?

Annually and renewable term insurance.

Eligible Groups

Group Life Insurance plans may be sponsored by employers, labor unions, credit unions, associations, and any other organization formed for a reason other than purchasing insurance.

Features of Group Insurance

Most cases, the employee's company who is the master policyholder, selects the type of insurance coverage, which may be either permanent or term insurance.

Contributory Plan

When the premium for the group insurance are shared between the employer and employees, the plan is referred to as a contributory plan.

Will insurance company require a minimum number of persons to be insured under a group plan?

Yes

If the employer pays all premium for a group life policy. Are all employees included in the plan?

Yes. Unless they are individually uninsurable according to the insurer or they refuse coverage in writing.