Group Life Insurance

With societal and economic transformations, the growth of large cities and the evolution of unions in the United States, the development of group insurance has burgeoned. The influence and political strength of unionized workers have compelled employers to offer group insurance as an employee benefit, typically written as one-year term insurance. The legal requirements of group insurance are consistent throughout the majority of states and include the following basic characteristics:

  • All states define a true group as having at least ten people covered under one master contract; however, some states allow even smaller groups.
  • Coverage is generally available without evidence of insurability; that is, without the need for individual medical examinations.
  • The master policy is issued to the employer, trust, union, or other association, with Certificates of Insurance being issued to the individual insured employees or members.
  • The insurance may not be obtained to benefit the employer, trust, union, or other association; it must be for the benefit of the covered employee or member, and his or her dependents.
  • Premiums are based on the experience of the group as a whole. It may be paid entirely by the policyowner (employer, trust, etc.), or it may be paid jointly by the policyowner and the insured. If the premium is paid entirely by the policyowner it's known as a noncontributory plan, and all eligible employees or members must be covered. If the premium is paid by both the policyowner and insureds, the policy is classified as a contributory plan, and at least 75 percent of all eligible employees or members must be covered. The term 'eligible employees' refers to an eligible class of employees, such as full-time employees, salaried workers (as opposed to workers paid on an hourly basis), non-union workers, etc. Certain groups of employees may be excluded from the eligible class as long as the exclusions are based on some particular occupational criteria. The policyholder is always required to pay at least some portion of the premium. Insureds, on the other hand, are by law not permitted to contribute more than a specified amount.
  • Individuals covered under the plan are classified in such a way (typically by salary, position, or length of employment) that they cannot choose the benefit levels.

Furthermore, group policies have special provisions that are unique to the category of 'group insurance,' though some are along the same lines as their counterparts found in policies for individual insurance. Basically, group policies must contain provisions pertaining to:

  • A grace period