LLQP Group Benefits Plan Concepts 5 — Questions and Answers
Question 1: Which provision in a group benefits plan allows a departing employee to convert their group life insurance to an individual policy without evidence of insurability?
- Conversion privilege (Correct answer)
- Portability provision
- Continuation of coverage clause
- Waiver of premium rider
Correct answer: Conversion privilege
The conversion privilege lets a terminating employee convert group life coverage to an individual permanent policy within a specified period (usually 31 days) without a medical exam.
Question 2: A group benefits plan includes 'stop-loss' insurance. What is its primary purpose for an ASO (Administrative Services Only) plan sponsor?
- To cap the plan sponsor's financial exposure when aggregate or individual claims exceed predetermined thresholds (Correct answer)
- To stop the insurer from increasing premiums mid-year
- To prevent employees from filing claims after a plan year ends
- To limit the number of claims processed per month
Correct answer: To cap the plan sponsor's financial exposure when aggregate or individual claims exceed predetermined thresholds
Stop-loss coverage protects a self-insured employer under an ASO arrangement by reimbursing claims that exceed a specific per-claimant or aggregate annual limit.
Question 3: What is the role of a 'third-party administrator' (TPA) in a group benefits plan?
- To administer claims and plan operations on behalf of a self-insured employer without assuming insurance risk (Correct answer)
- To act as an independent insurer that bears all claim risk for the group
- To regulate the insurer's compliance with provincial benefit legislation
- To sell group insurance products directly to employees
Correct answer: To administer claims and plan operations on behalf of a self-insured employer without assuming insurance risk
A TPA handles administrative functions such as claims adjudication, record-keeping, and reporting for self-funded plans while the employer retains the financial risk.
Question 4: Under a group long-term disability (LTD) plan, what is the 'definition of disability' most favorable to the claimant?
- Any occupation — unable to perform any occupation for which the insured is reasonably suited
- Own occupation — unable to perform the material duties of the insured's own occupation (Correct answer)
- Partial disability — unable to perform at least 50% of normal duties
- Total disability — confined to a hospital or at home
Correct answer: Own occupation — unable to perform the material duties of the insured's own occupation
The 'own occupation' definition is most favorable to the claimant because it pays benefits if the person cannot perform their specific job, even if they could work in another field.
Question 5: An employer wants to add vision care to their existing group benefits plan. Which factor would most directly affect the premium for this benefit?
- The age and gender distribution of the employee group (Correct answer)
- The plan's current life insurance face amount
- The insurer's surplus position at year-end
- The geographic location of the insurer's head office
Correct answer: The age and gender distribution of the employee group
Vision care utilization tends to vary by age and, to some extent, gender, so the demographic profile of the group is a primary rating factor for this benefit.
Question 6: What is a 'benefit schedule' in a group life insurance plan?
- A table that defines the amount of life insurance each employee class receives, often as a multiple of salary or a flat amount (Correct answer)
- A calendar showing when premium payments are due
- A list of medical conditions excluded from coverage
- A document outlining the insurer's financial rating
Correct answer: A table that defines the amount of life insurance each employee class receives, often as a multiple of salary or a flat amount
A benefit schedule specifies coverage amounts by employee category (e.g., executives get 3× salary, other employees get 1× salary or a flat $50,000).
Question 7: Under a group benefits plan, 'subrogation' allows the insurer to:
- Recover claim amounts paid to an employee from a negligent third party who caused the employee's injury or illness (Correct answer)
- Transfer the group policy to a new insurer without the employer's consent
- Reduce future benefit payments by the amount recovered in a disability settlement
- Substitute one covered employee for another when the first leaves the company
Correct answer: Recover claim amounts paid to an employee from a negligent third party who caused the employee's injury or illness
Subrogation gives the insurer the right to step into the insured's shoes and pursue recovery from a responsible third party after paying a claim.
LLQP Group Benefits Plan Concepts 5
Which provision in a group benefits plan allows a departing employee to convert their group life insurance to an individual policy without evidence of insurability?