Group Life Insurance
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1. An Employee Group
2. Master Policy Vs. Certificate Of Insurance
3. Conversion Rights
4. Term vs. Permanent Insurance
5. Credit Life
6. Section 79 (IRC)
Types of Group Insurance
______ is the youngest and fastest growing branch of the life insurance business. Premiums are usually based on annual term life insurance. The coverage can be based on length of service and/or salary.
Group underwriting is usually written on a non-medical basis, meaning that no proof of insurability is required by the enrollees.
A group of individuals may NOT have come together for the specific purpose of securing group insurance protection.
Group Insurance Definition
1. An _____ is where a single employer gets coverage on its employees. Employee groups (the most common) now account for almost 90% of all group life insurance coverage in-force today. This usually requires a minimum of 10 enrollees on the date of issue.
_______ means that the people most likely to need insurance, those who are in poor health, will purchase insurance in greater numbers than those in good health. The following are a few steps which may be taken to avoid adverse selection:
Employment Probationary Period
A Contributory Group
An Employee Group - Adverse Selection steps
______ (usually 90 days) is nothing more than a period of time established by the employer for all new employees before the employee will be eligible for any group benefits. The employee is NOT covered by insurance during the probation period.
An Employee Group- Adverse Selection - Employment Probationary Period
______ is the 31 days following the end of the "probation" period in which the employee is entitled to enroll in the group plan. However, some group plans have an Open Enrollment Period which allows an employee to sign-up for benefits after the _____. Under "noncontributory" plans, enrollment is automatic.
SPECIAL NOTE: The eligibility period is the same as a grace period. If a loss occurs during the eligibility period and the enrollee has not signed up for a plan, the minimum coverage available under the Master Policy will be paid.
An Employee Group- Adverse Selection -Eligibility Period
_______ (a.k.a. Participating Group) is where employees contributeor participate in paying some of the premium. The employer must have at least 75% of employees and dependents enrolled in the plan.
An Employee Group- Adverse Selection - A Contributory Group
A ______ (aka______) is where the employer pays all the premiums. 100% of all employees (and their dependents) are automatically enrolled on the first day of eligibility.
An Employee Group- Adverse Selection - Noncontributory Group (a.k.a. Nonparticipating Group)
2. _____ : The employer receives the master policy; enrollees receive certificates of insurance.
The insurer will issue an individual certificate regarding insurance protection, benefits,and rights to the policyholder for delivery, by the employer, to every insured.
The employer is responsible for administering the group plan, for making sure the enrollee is aware of all benefits available and to make sure enrollees receive a Certificate of Insurance.
Master Policy Vs. Certificate Of Insurance
3. _____ for employees and dependents guarantees that coverage can be continued (at the insured's option) should the employee leave employment. The insured has 31 days to convert to an individual permanent life insurance policy. The enrollees are insured for the same amount of coverage provided under the group plan until the end of the 31st day.
No evidence of insurability is required when converting group coverage to an individual policy.
4. ______ - Almost all group life insurance is annual renewable term insurance. Premiums may fluctuate from year to year, depending on the number of employees and the average age of the group. Group coverage may be purchased with permanent insurance; however, the cost to the employer is much higher.
Term vs. Permanent Insurance
5. _____ coverage is a type of group coverage. A master policy is issued to a creditor(the bank) to insure persons who are debtors of the creditor. The creditor is the beneficiary.Credit life insurance is purchased to cover the repayment of a loan in the event the borrower(insured) dies before the loan has been repaid. The amount of life coverage on the insured may not exceed the amount of the debt owed.
6. ______ (____) - For group life insurance, the premiums paid by the employer are deductible for the employer. The premiums are NOT considered as taxable income to the insured. This applies only up to the first $50,000 of coverage. Premiums paid for coverageover the $50,000 are taxable as income to the employee. The life insurance death benefit is still income tax free to the beneficiary.
The life insurance coverage on the spouse may not exceed 50% of the working spouse's coverage.
A child's maximum life insurance coverage is $2,000.
Coverage in "excess" of these limits will cause a tax on the premiums paid for those benefits.
Section 79 (IRC)
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