1. Compare group underwriting with individual underwriting of insurance. Be as specific as possible, discussing the key differences between the two approaches.
2. a. Provide a hypothetical example of the use of the incontestability clause that benefits the insured.
b. Provide a hypothetical example of the use of the incontestability clause that benefits the insurer and thus the pool of insureds.
3. The following statements are about group insurance contracts. Select the answer choice containing the correct statement.
a. If a group policyholder pays the entire premium amount for the group coverage, then the group insurance plan is a contributory plan.
b. Each group member must receive individual copies of the master group contract.
c. Each group member insured under a group life insurance policy has the right to name the beneficiary who will receive the benefit payable upon that group member's death.
d. Group policyholders are not required to provide each group member with a certificate of insurance or a separate benefit booklet that describe the group insurance plan.
4. The following groups have applied for group life insurance coverage from Palm Tree Financial. Palm Tree's group underwriting guidelines are typical of most insurers. Select the answer choice describing a group that will likely FAIL to qualify for group insurance coverage.
a. BGH Associates is a small group of retired individuals who banded together as a group for the sole purpose of obtaining group life insurance coverage at reasonable rates.
b. In the United States, the Beach Town Labor Union promotes the welfare, interests, and rights of its members.
c. The Sunrise Company is a professional organization for accountants that provides continuing education classes and organized travel opportunities and seeks to provide voluntary group insurance coverage to its members.
d. BF&E Association is a group consisting of the eligible employees of several small employers and two labor unions that are in the building industry.
5. Group underwriters consider a number of specific characteristics of a group when evaluating whether that group is an acceptable risk. One factor that would tend to make an employer-employee group Eligible for group insurance coverage is if the
a. employer plans to pay no portion of the group insurance premium
b. employer anticipates experiencing excessive changes in the group membership
c. group will maintain at least a 25% participation level at all times in the group insurance plan
d. group has a sufficient number of new members periodically entering the group so that both the group's size and its age distribution remain stable
6. Some insurers offer group universal life (UL) plans and/or group variable universal life (VUL) plans. With regard to these two group plans, it is correct to say
a. that, under a group UL plan , the employer typically pays a portion of the policy premium
b. that, under a group UL plan, employees are not permitted to choose the amount of premium they wish to pay
c. that, under a group VUL plan, the employer typically pays the entire policy premium
d. that the participants in a group VUL plan are given a choice of different subaccount options for investing their cash values
7. Group life insurance policies usually include a number of standard provisions, many of which are similar to provisions found in individual life insurance policies. The following statements are about provisions typically found in group life insurance policies. Select the answer choice containing the correct statement and explain why the other answers are incorrect.
(a) The incontestability provision in a group life insurance policy prohibits an insurer from contesting an individual group member's coverage without contesting the validity of the master group contract itself.
(b) Some group life insurance policies include a conversion privilege, which allows a group insured whose coverage terminates for certain reasons to convert her group life insurance coverage to an individual life insurance policy, but only after presenting evidence of her insurability.
(c) Group life insurance policies typically include a misstatement of age provision but typically do not include a misstatement of sex provision.
(d) The grace period provision in a group life insurance policy specifies that, if the policy terminates for nonpayment of premiums, then the group policyholder is not legally obligated to pay the premium for the coverage provided during the grace period.
8. In the United States, two types of employer-sponsored retirement plans are a 401(k) plan and a stock bonus plan. With regard to these two types of retirement plans, it is correct to say that, under a
a) 401(k) plan, the amount of an employee's plan contribution is included in the employee's current taxable income
b) 401(k) plan, the employee enters into a salary reduction arrangement that permits the employer to deduct the amount of the employee's plan contributions from her salary
c) stock bonus plan, contributions are dependent upon company profits
d) stock bonus plan, retirement assets are accumulated on behalf of participants, and such a plan promises to provide a monthly retirement income benefit
9. In the United States, the Old Age, Survivors, Disability and Health Insurance (OASDHI) Act, or Social Security, provides retirement income benefits to qualified residents. In Canada, either the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP) provides retirement benefits. With regard to whether these programs require mandatory contributions from covered employees and their employers, it is correct to say that
a) both the Social Security program and the CPP and QPP require mandatory contributions
b) only the Social Security program requires mandatory contributions
c) only the CPP and QPP require mandatory contributions
d) neither the Social Security program nor the CPP and QPP require mandatory contributions
10. If Norman Michaels earns $150,000 in 2015, how much in total is paid into the social security system (including Medicare) on his behalf? Show your work. Use the SSA.gov website to get current tax rates and taxable income information.