Greenville and Spartanburg, South Carolina
Even when they lack life insurance through an individually owned policy, many people have group life insurance. Group life insurance is insurance that is provided by a group such as a labor union or employer.
Group Life Insurance Characteristics
Group life insurance covers groups of people who are independent of each other, except through their joint connection with the group under a single contract. To be eligible for any type of group insurance, the group should be a “natural group” to be created for a reason other than an insurance group.
The most frequent use of this kind of life insurance is in the field of business. The employers purchase group life insurance on behalf of their employees. Group life insurance is usually provided as renewable term insurance (although some form of permanent group life may be offered as well).
The NAIC (National Association of Insurance Commissioners) sets the standard for group life insurance policies. In most states, these requirements are:
- A group must cover at least ten people under a master policy.
- As a rule, no individual medical examinations are required.
- The participants in the plan receive certificates of insurance while the employer receives the master policy.
- Many states forbid the employer from naming himself/herself as the beneficiary. In other words, the insurance policy should be provided for the benefit of the participants only.
- The premiums aren’t based on the experience of each participant but on the entire group.
- The plan is not discriminatory, i.e., the participants do not choose benefit levels.
Group life premium rates are calculated based on the entire group. Because people continuously enter and leave the group (new employees enter the group and retirees leave it), life insurance premiums generally remain constant.
Mainly due to the lower management and operating costs, group life insurance is less expensive than single or individual life insurance per dollar of policy value.
Some states (such as Texas) limit the group term life insurance amount which can be offered. For example, the maximum amount of group life insurance is $ 250,000 or 700% of salary, whichever is higher. Most plans provide coverage related to the salary of the individual in one way or another.
Master Policy & Insurance Certificates
In a group life policy, the owner is the one who sponsors the policy and will pay the premium. The individual members of the group are those who are insured. A master policy is issued to the sponsor and this indicates that the sponsor is the owner of the policy and pays the premium. To prove coverage within the policy, the insured participants each receive an insurance certificate. Every insured individual names her or his beneficiaries or beneficiary.
