• Franchise Life (wholesale) Insurance: covered under this arrangement are employees of a common employer or members of a common association or society. The employer or group is the sponsor rather than the master policyholder. It collects and remits individual premia to the insurer. The insured holds an individual policy which he or she may keep in force through timely premium payments even if his or her relationship with the employer or association ends. The sponsoring organization determines the amount and type of coverage. Small groups whose size is below the minimum required by state law for group coverage are the typical user of such coverage.
  • Group Credit Life Insurance: financial institutions furnish what is a form of decreasing term insurance to cover debtors' lives in the amount of their loans. Commercial banks, savings and loan associations, credit unions, finance companies and retailers are examples of the types of companies that would purchase such coverage. Individual insureds pay the premia and choose which insurer to use. Each borrower may purchase insurance only up to the amount of his or her indebtedness. Creditor companies typically must have at least one hundred debtors per year, though requirements may vary by state law.
  • Blanket Life Insurance: a form of temporary coverage, blanket life insurance covers groups of people exposed to a common hazard. Coverage is automatic for the time during which the individuals in question are participating in the hazards specified in the blanket policy. For example, an airline may own a policy to cover its passengers for the duration of the flight; a sports team may cover its members while they are engaged in team play; a newspaper may offer coverage for its carriers. Individuals do not receive certificates of coverage and are not named in the policy.
  • Multiple Employer Trusts (MET): this sort of arrangement enables small employers to obtain group benefits for their employees. Coverage may be for one or several types of benefits (life, medical, disability) or even alternative forms of the same coverage (comprehensive or basic group health insurance). The employer must subscribe to the trust and receives a joinder agreement evidencing such membership. The employer and trust are the parties to the arrangement, not the individual insureds. Self-funding or a life insurance contract are the two means of providing benefits. If life insurance funds the contract, the trust is the master contract holder. The employees receive a master certificate outlining coverage. METs may use either a third party administrator or life insurance company for plan administration.
  • Multiple Employer Welfare Arrangements (MEWA): this is a type of multiple employer trust for labor unions that self insures and has tax-exempt status.
    • Benefit Determination: the employer determines benefit schedules according to
      • Earnings: coverage could be a flat amount or percentage of earnings (e.g. coverage equal to 1 ½ times one's salary)
      • Employment Position: in this sort of arrangement, the amount of coverage is positively correlated with the employee's status, e.g. staff may receive $40,000 of life insurance, while senior management at the vice president's level may receive $100,000 or more of coverage.
      • Flat Benefit: all employees have the same amount of life insurance coverage, irrespective of compensation or status within the company. Such arrangements are common when the coverage offered is small.

Income Tax Implications of Group Life Insurance

Related Articles
  1. Financial Advisor

    Group Term Life Insurance: What You Need to Know

    Is group term life insurance really a good deal? What you need to know about employer-sponsored group term life insurance coverage.
  2. Insurance

    When Should You Get Supplemental Life Insurance?

    For individuals with larger families and responsibilities, supplemental life insurance may bridge the shortfall in coverage from term or whole-life policies.
  3. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  4. Insurance

    4 Things That Keep You From Getting Life Insurance

    We look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
  5. Insurance

    How Much Homeowners Insurance Should You Carry?

    This breakdown of coverage into its component parts will provide the answer.
  6. Financial Advisor

    Now Is the Time to Check In on Clients' Insurance

    Insurance forms the foundation of many financial plans, and you need to make sure that your clients’ coverage is kept up-to-date.
  7. Insurance

    Filling The Gaps In General Liability Insurance

    Standard liability coverage may not be enough. Special needs call for specialized policies.
  8. Insurance

    Top 10 Life Insurance Myths

    The most difficult aspect of this complex product is determining how much coverage you need and why.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center