Group life insurance rules

Group life insurance: one contract, many insureds

Individual life insurance is a two-party deal: the insurer and the applicant. Group life insurance rearranges the parties. The insurer issues a single master policy to a policyholder — typically an employer, a labor union, an association, or a trust established for a group of employers. The people actually insured are members of that group, and each one receives a certificate of insurance rather than a policy. The certificate summarizes the coverage; the master policy is the controlling contract.

That structure drives almost every group-life exam question. Ask yourself: who holds the contract, who is insured, and who names the beneficiary? The policyholder holds the contract and usually pays or collects the premium. The insured member is the one whose life is covered and who names the beneficiary — the employer does not choose the employee's beneficiary.

Eligibility rests on the group, not the individual

Because the risk is spread across many lives, group life is normally underwritten on the group as a whole. Eligibility flows from a bona fide relationship — employment, union membership, association membership — and not from an individual medical exam. Groups must exist for a purpose other than obtaining insurance, and coverage is offered to classes of members defined by objective terms such as full-time status or length of service, so that individuals cannot be singled out. Amounts of insurance are set by a nondiscriminatory formula (a flat amount, a multiple of salary, or a schedule by class) rather than negotiated person by person.

Where Texas puts these rules

Texas collects its life insurance law in Title 7 of the Insurance Code, Chapters 1101 through 1154, and group life insurance sits inside that same title alongside individual life. Chapter 1101 supplies the core life insurance policy requirements — the standard provisions and contract rules for life policies in Texas — while the group chapters that follow in Title 7 address the master-policy-and-certificate arrangement, eligible group types, and the required certificate disclosures.

Study tip: when a Texas question describes a master policy, certificate, or an employer-sponsored plan, you are in the group-life portion of Title 7 — not in individual policy law.

Practical consequences to remember

• The certificate holder is the insured, and generally has the right to name and change the beneficiary.
• The policyholder can amend or terminate the master policy, which is why group coverage is not owned by the employee the way an individual policy is.
• Group coverage typically ends when the qualifying relationship ends, so continuation and conversion features — and the notices describing them — matter enormously. Always read the current Title 7 chapter text for the exact conditions, time limits, and disclosure duties, because those details are set by statute and are amended from time to time.

Know the structure cold, and the details attach to it easily.