Group life eligible groups, dependent coverage, and assignment of proceeds

Who can buy group life insurance

A group life policy is one master policy issued to a policyholder, such as an employer, union, association or trustee, with each covered person receiving a certificate. Because the group, not the individual, is underwritten, the law limits which groups may buy it. The classic test is that the group must exist for some purpose other than obtaining insurance, so that it is not just a collection of people who came together to buy cheap coverage.

Florida's group life part of the Insurance Code (chapter 627, part V) lists the eligible groups one by one:

• Employee groups: employees of one employer (the most common group).
• Debtor groups: a creditor insuring the lives of its debtors, usually for the amount owed.
• Labor union groups: members of a union.
• Trustee groups: a trust fund set up by employers and/or unions to insure their employees or members.
• Credit union groups: members of a credit union.
• Additional groups: other groups that meet the statute's conditions.
• Association groups: members of a qualifying association.
• Dependents: the part also has a separate section on group life insurance for dependents.

Florida association groups in detail

Florida spells out when a professional association may be the policyholder:

• the members must be engaged in a particular profession and licensed to practice it in Florida;
• the association must have existed for at least 2 years and hold regular meetings at least annually;
• the policy is issued to the association, or to the trustees of a fund established in Florida for it, and the association or trustees are deemed the policyholder;
• the coverage must be for the benefit of persons other than the association or its official representatives or agents.

Members may be insured, and so may their employees or dependents. Eligible members are all members, or all of any class defined by conditions tied to their profession or membership. Trustees of the fund, or their employees, may be insured if their duties are principally connected with the trusteeship.

Who pays matters. If members contribute toward their own coverage (contributory), the policy can go into force only if at least 100 eligible members elect to pay, and the insurer may require evidence of insurability. If members pay nothing (noncontributory), the policy must insure all eligible members. That mirrors the general rule: noncontributory plans require full participation, which protects the insurer against adverse selection.

Dependent coverage

Group life plans commonly let the insured person add a spouse and dependent children. Dependent coverage is typically a smaller, fixed amount than the employee's own coverage, is usually payable to the insured employee or member, and ends when the person stops qualifying as a dependent or the employee's own coverage ends.

Beneficiaries and assignment of proceeds

• The insured person, not the policyholder, designates the beneficiary. An employer or association generally cannot name itself beneficiary of its members' coverage.
• An insured person may assign their rights under a group certificate, such as ownership, the right to name a beneficiary, and the conversion privilege, for example to a trust or family member for estate-planning reasons. Proceeds then follow the assignment.
• An insurer that pays in good faith before receiving notice of an assignment is generally protected.

Memory hook: the group buys the policy, the insured picks the beneficiary, and the insured can give away the ownership rights.