Chapter 8

Question 1

Individual life insurance provides coverage for one person; group life insurance, however, does what?

Answer 1

Provides coverage for many lives using one contract - resulting in lower premiums

Question 2

Are group life insurance premiums generally less expensive than an individual policy?

Answer 2

Yes

Question 3

What is the general rule to sponsor a group insurance plan?

Answer 3

the group must have been formed for a purpose other than obtaining group insurance for its members

Question 4

What 5 types of groups is group insurance limited to?

Answer 4

1. Employer Group Plans
2. Multiple Employer Trusts (METs)
3. Labor Unions
4. Association Group Plans
5. Group Credit Life insurance

Question 5

What are employer group plans?

Answer 5

A group insurance plan sponsored for employees is sometimes referred to as employee group plans

Question 6

What are multiple employer trusts?

Answer 6

A trust made up of multiple small employers in the same or similar industries that form to provide life insurance or other benefits for their employees while gaining tax benefits

Question 7

What are labor unions?

Answer 7

Two or more labor unions may join together to provide group insurance for their collective members. Labor unions are sponsored under a Taft-Hartley Trust

Question 8

What are Association Group Plans?

Answer 8

A trade, professional, or other type of association may sponsor a group plan for its members

Question 9

What are credit life insurance plans?

Answer 9

A lender, or creditor, may sponsor a group life insurance plan for its group of debtors. Two features that separate group credit insurance from other plans:

(1) Group credit insurance can be made payable to the sponsoring group
(2) the amount of coverage is limited to the amount of each insured’s individual debt

Question 10

With group policies, is one master policy issued to the sponsoring group and the applicant is the policyonwer or policyholder?

Answer 10

Yes

Question 11

Who is the policyowner or policyholder?

Answer 11

An employee or labor union

Question 12

Is the individual employee a party to the group insurance contract?

Answer 12

No

Question 13

Instead of getting a copy of the master policy (because they are not a party to the group insurance contract) what does an individual member receive?

Answer 13

A certificate of insurance - as evidence of their coverage under the master policy

Question 14

What does the certificate of insurance (provided to individual maembers) define?

Answer 14

1. Benefits under the plan
2. Individual’s certificate number
3. Beneficiary’s name

Question 15

The employee, a certificate holder, has the right to do what?

Answer 15

Name their beneficiary

Question 16

The certificate of insurance is evidence of coverage for the individual member

Answer 16

Note - but the master policy is held by policyholder or applicant (the group)

Question 17

With a contributory group plan, the employee does what?

Answer 17

Pays part of the premium

Question 18

If the employer pays the entire premium on behalf of the employee, what is the plan referred to as?

Answer 18

Noncontributory

Question 19

What percent of employees MUST participate in a contributory plan?

Answer 19

75%

Question 20

What percent of employees MUST participate in a noncontributory plan?

Answer 20

100% - the employer can sponsor the plan if they pay 100% of the premium and 100% of eligible employees enroll

Question 21

With group plans, the insurance underwriter focuses on the group as a whole, rather than its singular members. Each group participant is required to do what?

Answer 21

Complete a short form that usually consists of the individual’s name, address, SSN, dependent information, and beneficiary designation.

Question 22

Are there typically medical questions for group plan individuals?

Answer 22

No - thus, no medical underwriting takes place. It’s therefore possible for individuals with poor health to receive group insurance benefits

Question 23

What is the “enrollment period”

Answer 23

Employees must sign up for a (contributory) group plan within 31 days of the ending of a probationary period

Question 24

Can an employee enroll by providing evidence of insurability?

Answer 24

Yes - note, no medical exam is necessary (this is for group plans)

Question 25

If an employee declines coverage during an enrollment period, and then decides later to enroll, the insurer may do what?

Answer 25

Ask medical questions and require a medical exam

Question 26

If an employee misses enrollment, many plans don't allow "late enrollees" to enroll until when?

Answer 26

The annual open enrollment period

Question 27

Does the enrollment period follow the probationary period?

Answer 27

Yes

Question 28

Do employers and unions determine the amount of coverage their employees will receive from the group life insurance plan?

Answer 28

Yes - the actual amount of coverage doesn't have to be the same, however, the coverage must be based on a formula that applies to all plan participants

Question 29

What are some common formulas for determining the amount of coverage to apply to employees/union members?

Answer 29

1. % or Multiple of earnings | 2. Coverage Limit for different classes

Question 30

Is coverage for dependents of members of a group plan generally less than the limits established for employees?

Answer 30

Yes

Question 31

In addition to eligible employees, eligible dependents may also be provided with coverage under a group life insurance plan - what are some examples of dependents?

Answer 31

1. Spouse 2. Children 3. Dependent Parents 4. Other Individuals Financially Dependent on Insured

Question 32

Is dependent coverage typically a smaller amount than the employee?

Answer 32

Yes

Question 33

What is a drawback of group life insurance?

Answer 33

Dependents lose their coverage if one of a few things happens

Question 34

What are the 3 scenarios where a dependent can lose coverage in group life insurance?

Answer 34

1. Certificate Holder Leaves Company 2. Employer discontinues plan 3. Insurer doesn't renew policy

Question 35

How can dependents lose coverage from a group plan?

Answer 35

1. Certificate Holder Dies | 2. They are legally divorced from the certificate holder

Question 36

Due to the drawbacks of group life insurance, certificate holders and dependents must have the right to an individual policy if what occurs?

Answer 36

1. Conversion must be done within 31 days from date coverage is lost 2. Converted Policy must be permanent, not term 3. Converted Policy must provide the same amount of coverage that the individual had under the group policy 4. Premiums are based on attained age at the time of conversion 5. No proof of insurability is required

Question 37

Must a converted policy be permanent, not term?

Answer 37

Yes

Question 38

Must a converted policy provide the same amount of coverage that the individual had under the group policy?

Answer 38

Yes

Question 39

Must premiums be based on attained ge at the time of conversion?

Answer 39

Yes

Question 40

Is proof of insurability required when converting from group to individual policy?

Answer 40

No

Question 41

Coverage continues through the conversion period (the 31 days following the loss of group coverage). If the insured dies during that period, the benefit is paid as if the insured had decided to convert the group coverage to an individual policy

Answer 41

Note

Question 42

Creditors sponsor group life insurance plans for their borrowers as part of the loan transaction - t/f?

Answer 42

True

Question 43

For creditor group life insurance, how much is the life insurance for?

Answer 43

The value of the debt owed - alternatively, the individual could purchase an individual policy and assign the death benefit to the creditor

Question 44

What are the advantages of an individual policy vs a creditor group life insurance?

Answer 44

1. THe policyowner controls the policy, the lender owns/controls the group policy 2. The policy can continue even after the debt/loan has been paid off

Question 45

What are the disadvantages of an individual policy vs a creditor group life insurance policy?

Answer 45

1. Individual Policy can be a higher premium than group coverage 2. evidence of insurability is required for individual policies

Question 46

If two or more labor unions get together to provide coverage, what is that called?

Answer 46

A Taft Hartlay Trust

Question 47

In group insurance, the sponsoring group is issued a "master policy" t/f?

Answer 47

True