Chapter 12

Question 1

Define the grace period provision in terms of group life insurance.

Answer 1

typically 30-31 days long. if premium is not paid in this time the policy will terminate.

Question 2

what is a rule in the grace period provision, that is different from individual insurance?

Answer 2

if the policy terminates for nonpayment of premiums then the group policy holder is legalloy obligated to pay the premium for the covegrage provided during the grace period.

Question 3

Define the incontestability provision that is specific to group life insurance.

Answer 3

limits the period during which the insurance company may use statements in the group insurance application to contest validity of the master group insurance contract. the insurer can contest an individual group members coverage without contesting the validity of the group.

Question 4

what is the rules with beneficiary designations in term of group life insurance

Answer 4

unless its a creditor group, each member can name a beneficiary. The group member also has the right to change the beneficiary desgination.

Question 5

who can be the beneficiary in a creditor life plan, but in no other type of plan?

Answer 5

the group policy holder

Question 6

many group life insurance policies contain a portability provision. What does it do?

Answer 6

allows a group insured whos coverage terminates for a certain reason to continue her coverage under the group plan typically without presenting evidence of insurability.

Question 7

what is portable coverage?

Answer 7

group insurance coveragte that can be continued if an insured employee leaves the group.

Question 8

what are the conditions to continue coverage under the portability provision?

Answer 8

person must complete an application an pay the initial premium within a stated time after the group eligibility terminates.

Question 9

some group like policies include a conversion privilege. what is that?

Answer 9

allos a group insured whose coverage terminates for certain reasons to convert her group life insurance coverage to an individual life insurance policy, usually without evidencfe.

Question 10

is there typically a misstatement of sex provision in group insurance?

Answer 10

no, since group premiums do not vary according to sex.

Question 11

what happens if a misrepresentation of age is discovered?

Answer 11

the insurer will retroactively adjust the amount of the premium required for the coverage to reflect the group insured’s correct age. The amount of the death benefit payment remains unaffected.

Question 12

All the usual settlement options are generally made available in group insurance, but a modification is made on the income option. What is it

Answer 12

the death benefit payable usually must be at least a stated minimum amount.

Question 13

What is the type of insurance plan usually associated to group insurance?

Answer 13

YRT (yearly renewable terms)

Question 14

Is evidence typically required for group insurance every year?;

Answer 14

no.

Question 15

can an insurer change the premium once the policy has been issued? why?

Answer 15

yes, the policy does not build cash value, so it can change the premium on the renewal

Question 16

what is a benefit the emploees receive when employers pay the premium each year?

Answer 16

a financial benefit. The income tax treatment. Some or all of the premiums paid by the employer for a group term life insurance coveragre for employee are considered taxable income to the emplouee.

Question 17

what is ADB attractive to employers?

Answer 17

theyre cheap, and some of them offer an additonal traval accident benefit which paus out if the employee is injured while travelling.

Question 18

employers use group cash value life insurance plans to help employees purchase life insurance coverage that will continue after their retirement. what is required from the employees?

Answer 18

usually required to pay a significantportion of the premiums.
- participation from employees in this benefit is lower.

Question 19

what are the 3 most commonly offered group cash value life insurance plans?

Answer 19

1. group paid0up plans
2. level premium whole lif e plans
3. group universal life plans

Question 20

what are group life insurance purchased under a group paid up plan?

Answer 20

combines paid-up whole life insurance with decreasing amount of term life insurance.
- if the employee retired or leave the group for any reason, the amount of coverage he has purchased remains in force

Question 21

what is group life insurance purchased under the level premium whole life plan?

Answer 21

its written on a limited-payment who life plan,

• since they build cash value, employers often sue them to provide retirement income benefits for emplouees.
• if the employee leaves before her planned retirement age, the coverage usually terminates.

Question 22

some insurers offer UL (universal life) and or group variable universal life (VUL) plans. Define them in terms of group insurance.

Answer 22

the employer doesnt pay the premiums.

• each employe chooses their premiums, and the cash value depends on the amount paid.
• the particiapnts in VUL plans are given a cho9ie of different subaccount options for investing their cash values.

Question 23

what is group creditor insurance?

Answer 23

its issued to a creditor such as a pan, to insure the lives of the creditos current and future debtors.

Question 24

how does group creditor insurance differ from other types of group insurance policies?

Answer 24

1. they designated the policy holder as the beneficiary
2. the amount of insurance on each group insurance coverage usually is paid by the debtor, although it may be paid entirely by the creditor or

Question 25

what does the income tax benefit provision do for group retirement plans

Answer 25

the benefit is provided for sponsors and particiapnts who deposit funds into retirement plans that meet the applicable government requirements

Question 26

name the 3 compoenents of a group retirement plan

Answer 26

1. the plan ( describes the benefits and payout) 2. a method for administering the plan 3. the funding vehicle into which the plan assets are invested.

Question 27

insurance companies are involved in activities related to those components of a group retirement plan. What are they?

Answer 27

1. designing and developing retirement plans 2. admnistering retirement plans 3. providing reireement plan funding vehicles.

Question 28

what is a plan document?

Answer 28

a detailed legal agreement that establishes the existence of an employer-sponsored retirement plan and specifies the rights and obligations of various parties to the plan.

Question 29

define an automatic participation emoloyer-sponsored retirement plan?

Answer 29

all eligible group members are automatically enrolled as plan participants. Typically, noncontributory plans are automatic plans.

Question 30

define a voluntary participation employer-sponsored retirement plan

Answer 30

eligible group members have choice between participating or not participating in the plan. typically contributory.

Question 31

what does a plan's vesting requirement define?

Answer 31

when a plan participant is entitled to receive partial or full benefits under the polan even if he terminates employement prior to retirement.

Question 32

what is a benefit formulat?

Answer 32

it describes the calculation of the plans sponsor's financial obligation to plan participants.

Question 33

what are the two most common types of benefit formulas?

Answer 33

1. defined benefit formula- specifies the amount of retirement beenfit a plan sponsor promises the provide4 to each plan participant. 2. defined contribution formular- specifies the level of contributions that the plan sponsor promises to make to the plan. The benefit that a participant will receive depends on the investment performance of the funds of the plan.

Question 34

a plan sponsor usually names a plan administrator. What do they do (can be a person or a company)

Answer 34

they become resposible for: - maintaining accurate reords on all participants - determine amount of benefit pauable to plan paritipants - provide participants with info about the polan

Question 35

the sponsor of a retirement plan must choose a funding vehicle for the plan. What is this?

Answer 35

AKA funding instrument - an arrangement for investing a retirement plan's assets as those assets are accumulated. - insurers are flexible in tailoring their products to meet specific needs

Question 36

what are the four general types of employer-sponsored retirement plans?

Answer 36

1. defined benefit pension plans 2. saving plans 3. profit sharing plans 4. stock bonus plans

Question 37

What is defined under a benefit pension plan.

Answer 37

employees are guarenteed with a pension- which is a lifetime monthly income benefit that begins at retirement. - generally are noncontributory - in some countries some employes agree to contribute a certain % of employee's salaries to the plan, and employees can add too.

Question 38

what is defined as a saving plan | ?

Answer 38

is a retirement plan to which a plan sponsor may make contributions on behalf of a plan participant if the participant makes contibutuions to the plan. - defined contribution plan - amoutn of employers contibution = emlpoyees contribution

Question 39

what is a popular type of savings plan in the us?

Answer 39

401(k) plan, which allows employees to make contributions on a pre-tax basis.

Question 40

define the profit sharing retirement savings plan

Answer 40

its funded primariloy by cash contributions payable from the employer profits. - contributiuons are based on companys profits (thus can flucturate)

Question 41

define stock bonus retirement plans

Answer 41

. a plan sponsor that is a stock company makes contributions on behalf of plan participants in the form of corporations stock. - regarded as stock bonus plan - value of stock shares fluctuates - do not promise to provide a monthly retirement income benefit.

Question 42

for most people in the US, government retirement income benefits are provided under the OASDHI act, AKA social security. What id this?

Answer 42

a federal program that provides specific benefits [ including retirement income benefits] to people who have contributed to the plan during their income-earning years. - also provides benefits to disabled, and dependants of deceased workers.

Question 43

who manages the social security program?

Answer 43

the federal goverment administers the program and makes frequent changes in the funding and benefits.

Question 44

what is the universal pension plan that provides a pension to all canadian r5esidents who are >65 y.o. regardless of pre-retirement wages?

Answer 44

the federal old age security (OAS)

Question 45

every one person who is > 65, and is residents, receives the same pension amount. But peoples whos incomes exceed certain amount must do what?

Answer 45

repay part of all of the pension amount recieved.

Question 46

what funds the OAS?

Answer 46

taken from federal government general tax revenus

Question 47

what does the QPP or CPP give in addition?

Answer 47

provides pensions for wage earners who have contributed money into the plan during working years. - participation is mandatory - the amount paid out, if related to the amount contributed by the person.

Question 48

wht is the pension plan structure in Japan?

Answer 48

its a universal plan that provides pension to residents > 65 y.o. - people 20-59 pay flat monthly premium. - people 65 or older and paid premiums for 25 yrs. receive monly beenfit based on amoutn paid. - participation is mandatory - benefits are funded through compulsory contributions form employees and their employers.