Lesson 6 Review
The basic principle of group insurance is to provide insurance coverage for a number of people under one contract known as the single master contract or master policy. Group life insurance is typically provided by an employer to cover the employees of the company under one master policy, and employees receive a certificate of coverage.
Experience rating relies on the group's track record of past claims to determine premiums.
Under a group policy, the group as a whole must qualify for coverage, not each individual. The employer as the policyowner determines the amount of coverage to be offered. The insurer can require a certain amount of employee participation before issuing coverage.
Contributory group life insurance plans are those plans in which the employee contributes a portion of the premium and the employer pays the rest. Noncontributory group life insurance plans are those plans in which the employer pays the entire premium and the employee supplies no portion of the premium costs.
Florida law requires 100% participation by eligible employees in noncontributory group life insurance plans. There is no requirement for minimal participation in contributory group life insurance plans.
Florida does not place minimum guidelines on the amount of participants required to be considered for group coverage.
Insurable groups typically fall into one of the following categories:
- Single-employer groups
- Multiple-employer groups
- Labor unions
- Trade associations
- Creditor/debtor groups
- Fraternal organizations
There are two types of insurance plans for group life insurance programs: (1) Term Life and (2) Whole Life. Group term life insurance is the least expensive group life coverage. Policy premiums at renewal time are based on the entire group's loss experience during the previous year. Group whole life insurance can be broken down into three different types of offerings: (1) Group ordinary plans, (2) group paid-up plans, and (3) group universal life plans.
Exceptions to the master policy theme are franchise, blanket, and credit life insurance.
- Franchise life insurance - Individually owned policies for small groups.
- Blanket life insurance - Temporary coverage of a specific hazard for a specific group.
- Credit life insurance - Applies to the relationship between debtor groups and creditor groups.
A MET is a popular method of marketing group benefits to employers who have a small number of employees.
A MEWA provides insurance for union employees and is self-funded with tax exempt status. Employees covered under a MEWA are required by law to have an employment-related bond.
All group life insurance policies must be convertible. The conversion period is 31 days. Any death within the conversion period is covered.
Industrial life policies that total $3,000 or more in face value can be converted into an ordinary life policy without evidence of insurability.
The information contained in Unit 10 of the Florida study manual has been presented in Lesson 6 of the online course.
