CLU Group Benefits and Employee Insurance 2 — Questions and Answers
Question 1: What is a key advantage of a noncontributory group life insurance plan from the employer's perspective?
- Employees can choose their own coverage levels
- 100% participation is automatic, eliminating adverse selection (Correct answer)
- Premiums are tax-deductible only for noncontributory plans
- Coverage extends beyond active employees automatically
Correct answer: 100% participation is automatic, eliminating adverse selection
Noncontributory plans, where the employer pays 100% of the premium, require 100% employee participation, which completely eliminates adverse selection.
Question 2: Which federal law requires employers with 20 or more employees to offer continuation of group health coverage to qualifying beneficiaries who lose coverage?
- ERISA
- HIPAA
- COBRA (Correct answer)
- ACA
Correct answer: COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) mandates that employers with 20+ employees offer continued group health coverage for up to 18–36 months after qualifying events.
Question 3: In a group insurance context, what is a 'benefit trigger' in a long-term care insurance policy?
- The premium payment date
- A condition that must be met before benefits are payable (Correct answer)
- The employer's contribution percentage
- The maximum benefit period
Correct answer: A condition that must be met before benefits are payable
A benefit trigger is a qualifying condition — such as inability to perform a specified number of ADLs or cognitive impairment — that must occur before LTC benefits become payable.
Question 4: How does dependent life insurance under a group plan typically differ from the employee's own coverage?
- Dependents must provide evidence of insurability
- Dependent coverage amounts are usually smaller flat amounts (Correct answer)
- Dependents are covered under a separate ERISA plan
- Dependent premiums are always paid by the employee
Correct answer: Dependent coverage amounts are usually smaller flat amounts
Dependent life insurance under group plans typically provides small flat-dollar amounts (e.g., $2,000–$10,000) rather than multiples of salary, as for the employee.
Question 5: What is the 'evidence of insurability' requirement most commonly waived in group life insurance during?
- Open enrollment periods only
- Initial eligibility period when first becoming eligible (Correct answer)
- Annual salary review periods
- COBRA continuation elections
Correct answer: Initial eligibility period when first becoming eligible
Evidence of insurability is most commonly waived during the initial eligibility period — typically the first 30 to 31 days after becoming eligible — encouraging enrollment without medical underwriting.
Question 6: Which type of group insurance arrangement shifts the risk of catastrophic losses back to the employer while using an insurance carrier for claims administration?
- Fully insured plan
- Self-funded plan with stop-loss coverage (Correct answer)
- Participating whole life plan
- Universal life group plan
Correct answer: Self-funded plan with stop-loss coverage
A self-funded plan with stop-loss coverage (specific and aggregate) allows employers to pay routine claims directly while the insurer covers losses exceeding defined thresholds.
CLU Group Benefits and Employee Insurance 2
What is a key advantage of a noncontributory group life insurance plan from the employer's perspective?