LOMA 281 Module 4 Study Questions
and Answers 2023-2024
Group Insurance - A method of providing life or health insurance coverage for a group
of people under one insurance
contract.
commonly provide:
- life insurance, medical expense insurance, disability insurance, and dental
insurance
coverage
Master group insurance contract - An insurance contract that insures a number of
people.
Group insured - An individual covered by a group insurance policy.
Group policyholder - The person or organization that decides what types of group
insurance coverage to purchase for a specific group, negotiates the terms of the group
insurance contract, and purchases the group insurance coverage.
Which of these people or companies is a party to the group insurance contract?
(Choose all that apply.)
a. Jerome Tate
b. Able Life Insurance
c. The Stetson Company - B & C- The Stetson Company and Able Life are the parties to
the contract. Stetson purchased the contract for the benefit of its employees, and the
contract names Stetson as the owner of the group policy. Jerome is insured by the
contract, but he is not a party to it.
requirements for a valid contract - - The parties to the contract must mutually agree to
the contract's terms
- The parties must have contractual capacity
- The parties must exchange legally adequate consideration
-The parties must enter into the contract for a lawful purpose
Do you think Able Life and The Stetson Company (the parties to the group insurance
contract) have to meet these same four basic requirements? a. Yes, the
requirements generally are the same.
LOMA 281 Module 4 Study Questions and Answers 2023-2024
,b. No, the requirements are different. - a. The parties must meet the same requirements
whether they are entering into a group contract or an individual contract. However, one
difference between a group insurance contract versus an individual insurance contract
has to do with the lawful purpose requirement.
Group insurance contracts have no insurable interest requirement - Instead, a group
contract meets the lawful purpose requirement because the policyholder buys the
coverage for others and is unlikely to benefit from the death of the insureds. As a result,
the group policyholder's interest in the contract doesn't present the same risk of creating
a wagering agreement.
Jerome is covered by the group life insurance plan issued by Able Life. This means that
Jerome is a
group
a. Policyholder
b. Insured - B. - Jerome is a group insured; The Stetson Company is the group
policyholder.
Is Jerome a party to the group insurance contract?
a. Yes
b. No - B - The parties to the group life insurance contract are The
Stetson Company and Able Life.
Was The Stetson Company required to have an insurable interest in the lives of
participating employees? a. Yes
b. No - B. - A group policyholder doesn't need an insurable interest in the lives of the
insured group members. This is one difference between group life and individual life
insurance.
Certificate of insurance - A document that describes the coverage that the group
insurance contract provides and a group insured's rights under the
contract.
The Stetson Company's plan is a noncontributory plan. What does this mean? a.
Jerome must pay some or all of the premium for his coverage.
b. Stetson pays the entire premium for Jerome's coverage.
c. Jerome and Stetson equally split the premium for Jerome's coverage. - B. - In a
noncontributory plan, the policyholder pays the entire premium for the coverage.
noncontributory plan - A group insurance plan for which insured group members are not
required to pay any part of the group insurance
premium.
LOMA 281 Module 4 Study Questions and Answers 2023-2024
,contributory plan - A group insurance plan under which insured group members must
pay part or all of the premium for their coverage.
The Accent Company, an employer, has a group life insurance plan that insures the lives
of eligible employees. Accent pays the entire premium for the coverage. Check all the
statements that are true for this situation.
a. Accent's group life insurance plan is a noncontributory plan
b. Accent must provide employees with a copy of the master contract
c. Accent must name the beneficiary of the coverage - A. - Accent's group life plan is a
noncontributory plan—employees are not required to contribute. Accent must provide
employees with a certificate of insurance, not the master contract. The employee names
the beneficiary for his life insurance coverage, not Accent.
group insurance provides expense savings in the following three areas: - - sales
- underwriting and policy issue
- policy
administration
Group underwriting costs are lower because - the insurer evaluates the risk
characteristics of the group as a whole—not the risk presented by each group member.
One exception is for very small groups. For these, underwriters will evaluate group
members individually.
Policy issue costs are lower because the insurer issues one master policy rather than
many individual policies.
Group plan administration is mostly recordkeeping. Group life insurance requires current
information about - - the name of each group insured
- the amount of coverage for each group insured
- the name of each group insured's beneficiary
We can categorize group insurance plans according to whether the insurer or the group
plan handles administrative and recordkeeping activities. The Stetson Company keeps
the records of each group insured and handles other administrative duties. This means
that Stetson's group life plan is
a. An insurer-administered plan
b. A self-administered plan - B. - When the group policyholder maintains these records,
the plan is a self-administered plan. When the group insurer maintains these records,
the plan is an insurer-administered plan.
self administered plan - A group insurance plan for which the group policyholder is
responsible for handling the administrative and recordkeeping aspects of the plan.
- less expensive
LOMA 281 Module 4 Study Questions and Answers 2023-2024
, Insurer-administered plan - A group insurance plan for which the insurer is responsible
for handling the administrative and recordkeeping aspects of the
plan.
- more expensive
When The Stetson Company applied for the group life insurance policy, Able Life's
group underwriters evaluated the application before issuing the policy. Did Able Life
require each Stetson employee to provide evidence of insurability? a. Definitely yes
b. Probably not - B. - In general, group underwriting focuses on characteristics of the
group rather than on the insurability of the individuals to be insured. However, small
group underwriting sometimes requires individual underwriting. Also, sometimes a group
member may have to provide evidence of insurability—such as if the member
enrolls outside of the designated enrollment period—especially if the plan is
contributory.
Individual underwriters and group underwriters ask the same basic questions: - - Does
the proposed insured—whether an individual or a group—present an average risk? A
greater-than-average risk? A less-than-average risk?
- Can the insurer estimate the future loss experience?
- Is that potential loss experience acceptable to the insurer?
Which underwriting objectives are common to both group and individual underwriting?
Choose all that apply.
a. Prevent antiselection
b. Keep administrative costs for the coverage as low as possible
c. Assign a risk classification to the proposed insured individual or group
d. Charge the appropriate premium rate(s) - A, B, C, & D - Group and individual
underwriters want to prevent antiselection and keep administrative costs as low as
possible. The underwriters assign a risk classification that applies to the group or the
individual and charge a premium rate based on the risk classification.
reason for a group's existence - Not every type of group is insurable. The reason for a
group's existence helps group underwriters determine whether or not a group is eligible
for insurance.
Help Dale evaluate several different groups for group insurance coverage. Select each
eligible group based on the reason for the group's existence. Choose all that apply. a.
The full-time employees of the Carlyle Corporation
B. Workers who are members of the Woodworkers Union of America
c. Workers who are members of either the Woodworkers Union of America or the
Electrical Workers Union
D. Ten friends who formed their own club to get a group insurance policy
LOMA 281 Module 4 Study Questions and Answers 2023-2024
and Answers 2023-2024
Group Insurance - A method of providing life or health insurance coverage for a group
of people under one insurance
contract.
commonly provide:
- life insurance, medical expense insurance, disability insurance, and dental
insurance
coverage
Master group insurance contract - An insurance contract that insures a number of
people.
Group insured - An individual covered by a group insurance policy.
Group policyholder - The person or organization that decides what types of group
insurance coverage to purchase for a specific group, negotiates the terms of the group
insurance contract, and purchases the group insurance coverage.
Which of these people or companies is a party to the group insurance contract?
(Choose all that apply.)
a. Jerome Tate
b. Able Life Insurance
c. The Stetson Company - B & C- The Stetson Company and Able Life are the parties to
the contract. Stetson purchased the contract for the benefit of its employees, and the
contract names Stetson as the owner of the group policy. Jerome is insured by the
contract, but he is not a party to it.
requirements for a valid contract - - The parties to the contract must mutually agree to
the contract's terms
- The parties must have contractual capacity
- The parties must exchange legally adequate consideration
-The parties must enter into the contract for a lawful purpose
Do you think Able Life and The Stetson Company (the parties to the group insurance
contract) have to meet these same four basic requirements? a. Yes, the
requirements generally are the same.
LOMA 281 Module 4 Study Questions and Answers 2023-2024
,b. No, the requirements are different. - a. The parties must meet the same requirements
whether they are entering into a group contract or an individual contract. However, one
difference between a group insurance contract versus an individual insurance contract
has to do with the lawful purpose requirement.
Group insurance contracts have no insurable interest requirement - Instead, a group
contract meets the lawful purpose requirement because the policyholder buys the
coverage for others and is unlikely to benefit from the death of the insureds. As a result,
the group policyholder's interest in the contract doesn't present the same risk of creating
a wagering agreement.
Jerome is covered by the group life insurance plan issued by Able Life. This means that
Jerome is a
group
a. Policyholder
b. Insured - B. - Jerome is a group insured; The Stetson Company is the group
policyholder.
Is Jerome a party to the group insurance contract?
a. Yes
b. No - B - The parties to the group life insurance contract are The
Stetson Company and Able Life.
Was The Stetson Company required to have an insurable interest in the lives of
participating employees? a. Yes
b. No - B. - A group policyholder doesn't need an insurable interest in the lives of the
insured group members. This is one difference between group life and individual life
insurance.
Certificate of insurance - A document that describes the coverage that the group
insurance contract provides and a group insured's rights under the
contract.
The Stetson Company's plan is a noncontributory plan. What does this mean? a.
Jerome must pay some or all of the premium for his coverage.
b. Stetson pays the entire premium for Jerome's coverage.
c. Jerome and Stetson equally split the premium for Jerome's coverage. - B. - In a
noncontributory plan, the policyholder pays the entire premium for the coverage.
noncontributory plan - A group insurance plan for which insured group members are not
required to pay any part of the group insurance
premium.
LOMA 281 Module 4 Study Questions and Answers 2023-2024
,contributory plan - A group insurance plan under which insured group members must
pay part or all of the premium for their coverage.
The Accent Company, an employer, has a group life insurance plan that insures the lives
of eligible employees. Accent pays the entire premium for the coverage. Check all the
statements that are true for this situation.
a. Accent's group life insurance plan is a noncontributory plan
b. Accent must provide employees with a copy of the master contract
c. Accent must name the beneficiary of the coverage - A. - Accent's group life plan is a
noncontributory plan—employees are not required to contribute. Accent must provide
employees with a certificate of insurance, not the master contract. The employee names
the beneficiary for his life insurance coverage, not Accent.
group insurance provides expense savings in the following three areas: - - sales
- underwriting and policy issue
- policy
administration
Group underwriting costs are lower because - the insurer evaluates the risk
characteristics of the group as a whole—not the risk presented by each group member.
One exception is for very small groups. For these, underwriters will evaluate group
members individually.
Policy issue costs are lower because the insurer issues one master policy rather than
many individual policies.
Group plan administration is mostly recordkeeping. Group life insurance requires current
information about - - the name of each group insured
- the amount of coverage for each group insured
- the name of each group insured's beneficiary
We can categorize group insurance plans according to whether the insurer or the group
plan handles administrative and recordkeeping activities. The Stetson Company keeps
the records of each group insured and handles other administrative duties. This means
that Stetson's group life plan is
a. An insurer-administered plan
b. A self-administered plan - B. - When the group policyholder maintains these records,
the plan is a self-administered plan. When the group insurer maintains these records,
the plan is an insurer-administered plan.
self administered plan - A group insurance plan for which the group policyholder is
responsible for handling the administrative and recordkeeping aspects of the plan.
- less expensive
LOMA 281 Module 4 Study Questions and Answers 2023-2024
, Insurer-administered plan - A group insurance plan for which the insurer is responsible
for handling the administrative and recordkeeping aspects of the
plan.
- more expensive
When The Stetson Company applied for the group life insurance policy, Able Life's
group underwriters evaluated the application before issuing the policy. Did Able Life
require each Stetson employee to provide evidence of insurability? a. Definitely yes
b. Probably not - B. - In general, group underwriting focuses on characteristics of the
group rather than on the insurability of the individuals to be insured. However, small
group underwriting sometimes requires individual underwriting. Also, sometimes a group
member may have to provide evidence of insurability—such as if the member
enrolls outside of the designated enrollment period—especially if the plan is
contributory.
Individual underwriters and group underwriters ask the same basic questions: - - Does
the proposed insured—whether an individual or a group—present an average risk? A
greater-than-average risk? A less-than-average risk?
- Can the insurer estimate the future loss experience?
- Is that potential loss experience acceptable to the insurer?
Which underwriting objectives are common to both group and individual underwriting?
Choose all that apply.
a. Prevent antiselection
b. Keep administrative costs for the coverage as low as possible
c. Assign a risk classification to the proposed insured individual or group
d. Charge the appropriate premium rate(s) - A, B, C, & D - Group and individual
underwriters want to prevent antiselection and keep administrative costs as low as
possible. The underwriters assign a risk classification that applies to the group or the
individual and charge a premium rate based on the risk classification.
reason for a group's existence - Not every type of group is insurable. The reason for a
group's existence helps group underwriters determine whether or not a group is eligible
for insurance.
Help Dale evaluate several different groups for group insurance coverage. Select each
eligible group based on the reason for the group's existence. Choose all that apply. a.
The full-time employees of the Carlyle Corporation
B. Workers who are members of the Woodworkers Union of America
c. Workers who are members of either the Woodworkers Union of America or the
Electrical Workers Union
D. Ten friends who formed their own club to get a group insurance policy
LOMA 281 Module 4 Study Questions and Answers 2023-2024
