Lesson 1 Flashcards
(35 cards)
1.1.a Describe CPP/QPP death benefits
CPP provides a low maximum lump sum death benefit.
CPP pays monthly survivor benefits based on the age of the spouse/dependent children.
1.1.b Describe WC death benefits
WC pays a lump sum for covered deaths which vary by jurisdiction. As well as a pension to the surviving spouse. Some jurisdictions provide payments to dependent children as well.
In general death benefits from WC are higher than CPP benefits
1.1.c Explain why government-sponsored death benefits don’t impact the design or amounts paid in group plans?
Because CPP/QPP and WC death benefits are relatively modest the fact that these programs are available doesn’t affect the design or amounts paid in group plans
2.1 Describe the types of death benefits commonly provided in group insurance plans (5)
Basic life insurance is the most prevalent benefit available.
Other types of death benefits include:
- optional life
- dependent life
- AD&D
- retiree life
2.2.a Describe term insurance
Provides death benefits for a limited amount of time.
Paid only if the insured dies during the term of coverage.
There is no benefit if the insured doesn’t die during the covered period
2.2.b Describe whole life insurance
Will pay out when the insured dies. Level premiums are generally payable based on the age of the individual when joining the plan.
Generally premiums are payable for the member’s life but may also just be payable for a specific period (eg for 20 years to the age of 65)
Cash and other forfeiture values are provided usually after the policy has been in force for two years.
2.2.c Which is more expensive Group Whole Life or Term Life
Whole Life
2.3 Outline advantages of providing basic life insurance from a plan sponsor’s perspective
Offering this element of financial security can enhance plan member morale and productivity as well as the competitiveness of the plan sponsor’s benefit plan.
It also helps maintain positive public and plan sponsor/member relations
2.4 Outline the advantages of group term life insurance from a plan member’s perspective (6)
1) It adds a layer of low cost protection to personal savings
2) Death benefit payments aren’t taxable to the beneficiary
3) It allows plan members to obtain low cost coverage for spouses and dependent children in optional plans
4) It may reduce anxiety about the consequences of premature death
5) Terminated plan members may be able to convert their group insurance to term insurance without providing proof of insurability
6) Coverage can be provided to those who might be otherwise uninsurable or subject to substandard ratings
2.5 Outline the disadvantages of group term life insurance compared with individual whole life (4)
1) Relies upon the sponsor to continue the plan (business failure can leave members without coverage)
2) Not portable, less than 1% of members use conversion privilege when changing employers
3) It provides life insurance protection only. Some members may benefit from other features (savings or cash-value)
4) Unless optional and dependent life plans are offered standard schedules of insurance may not meet an individual’s needs
3.1.a Describe the conditions that must be met by eligible employees in single employer group contracts before coverage commences in group insurance plans
Generally only active permanent employees are eligible for basic life insurance
Usually only eligible if not absent from work due to sickness, injury or any other reason on the day they are meant to begin coverage.
For an absent employee coverage begins when they are due to return to work
3.1.a Describe the conditional that must be met by eligible employees in multi employer group contracts before coverage commences in group insurance plans
Members of a MEP don’t have to be actively at work when they begin coverage. This is due to irregular work schedules.
In MEPs eligibility provisions are typically based on hours worked or dollar contributions to the trust fund made by the employer on behalf of the employee
3.2 Explain how group size impacts participation rates
Minimum participation rates vary by insurer. Group size is a consideration when insurers set participation requirements.
3.3 Explain how the amount of basic life insurance coverage is determined for a group life insurance plan member
The amount of life insurance coverage a plan member is eligible for varies based on the benefit formula set by the plan sponsor
Members are assigned to various classes
A benefit schedule can be based on a plan members earnings, a flat amount, or some combination thereof
3.4 How does human rights legislation impact determination of life insurance coverage in group life insurance plans
A schedule of benefits must comply with human rights legislation dealing with anti discrimination statuses.
For example a member may be described as with or without dependents rather than married or single
3.5 Outline insurer requirements when a group life insurance plan member moves from one class to another (2)
The insurer must be informed of the change, typically within one month
If the change comes with increased benefit entitlements then the member may have to provide evidence of insurability
3.6 Explain how the nonevidence maximum (NEM) is calculated
Based on a formula usually unique to each insurer
The formula is based on group size, amount of premium, average amount of insurance per individual, and the nature of the risk or type of industry.
Some insurers determine the average amount of insurance per individual by excluding insurance on those who have significantly higher risk than others (ie company president)
3.7.a What is the OM
The Overall Maximum is combined amount of insurance up to and in excess of the NEM. Maximum insurance the insurer will issue to any individual
3.7.b Explain how the Overall Maximum (OM) is calculated (4 factors)
The OM is calculated according to a formula based on:
- group size,
- average amount of insurance per plan member,
- amount of premium and
- reasonableness of the schedule of insurance
3.8.a Define the retention limit
This limit is applicable to the combined amounts of basic and optional life as well as AD&D coverage.
3.8.b Explain the significance of the retention limit
Not a factor in determining the amount of term life insurance issued to individual group members it is considered by the insurer when deciding whether to accept the benefit schedule
3.9 List 4 situation in which a member is required to provide evidence of insurability for life insurance
Evidence is required if a member:
1) elects optional life insurance
2) Applies for life insurance and LTD benefits that exceed the NEM
3) Is considered a late applicant (applies more than 31 days after original eligibility)
4) Refuses coverage at the time of original eligibility and later wants to join the plan.
3.10 Outline participation rates generally required by insurers for basic life insurance in group life insurance plans
In noncontributory plans insurers generally require a 100% participation rate unless there are evidence of insurability requirements
In contributory plans insurers generally require 75 % participation rates. If participation is below that there may be evidence of insurability requirements.
In very large plans lower participation may be allowed without evidence
3.11 Identify 4 situations on which eligible group members and dependents of a noncontributory (compulsory) plan are automatically enrolled in the plan
Automatic enrollment occurs when:
a) The effective date of the plan
b) The eligible individual’s DOH
c) the eligible individual’s date of completion of a waiting period
d) for smaller groups on receipt of satisfactory evidence of insurability
