California Life-Only & Accident and Health AgentLife InsuranceMedium
An employer offers a group life insurance plan to its employees. Which of the following statements is TRUE regarding the characteristics of typical group life insurance?
- AIndividual medical underwriting is required for all participants.
- BEach employee receives an individual policy certificate.
- CCoverage is typically whole life and builds cash value.
- DThe employer generally owns the master policy and pays premiums.
Show answer & explanationAnswer & explanation
Correct answer: D. The employer generally owns the master policy and pays premiums.
In a typical group life insurance arrangement, the employer (or another sponsoring organization) owns the master policy and is responsible for paying premiums (either fully or partially). Employees receive certificates of insurance, not individual policies.
Why the other options are wrong
- A. Group life insurance typically offers coverage with little to no individual medical underwriting, especially for non-contributory plans, to avoid adverse selection.
- B. Employees receive a Certificate of Insurance, which summarizes their coverage, rather than an individual policy.
- C. Group life insurance is almost always term life insurance, providing coverage for a specific period (while employed) and usually does not build cash value.
Group Life Insurance Characteristics
Key features and operational aspects of life insurance policies offered to a group of people, typically employees of a common employer.
- One master policy covers the entire group.
- Employer (or sponsor) owns the master policy.
- Employees receive Certificates of Insurance.
- Usually term life, no cash value.
- Less stringent or no individual medical underwriting.
Memory trick: Master policy, Employer-owned, Certificates issued, Term coverage.