Overview: Understanding how group life policies are structured — who qualifies, who pays, and what happens when employment ends — is essential both for advising clients and for the licensing exam.

Master Policies and Certificates

The master policy is the complete contract. The employer/sponsor holds it, makes premium payments, and has the authority to amend or terminate it. Individual covered employees hold certificates of coverage — proof of their enrollment that summarizes benefits but does not grant contractual rights beyond what the master policy authorizes. Employees do retain the right to name and change their own beneficiaries.

Eligibility Requirements

Group plans use eligibility rules to prevent adverse selection without individual underwriting:

Minimum hours worked: Usually 30+ hours per week; part-time employees are typically excluded.
Actively-at-work rule: Employees must be performing their regular duties on the date coverage takes effect. An employee who is out on disability or extended medical leave on the coverage effective date must return to active work before their coverage begins.
Waiting (probationary) periods: New employees typically wait 30, 60, or 90 days before becoming eligible.
Enrollment windows: New hires must enroll within 31 days of eligibility. Missing this window means being classified as a late entrant who must provide evidence of insurability (EOI) to enroll later.
Predetermined benefit schedules: Coverage is tied to objective criteria — a flat dollar amount or a multiple of salary — so employees cannot self-select their coverage amount.

These rules collectively ensure the pool contains a natural cross-section of healthy and less-healthy individuals, keeping the plan actuarially sound.

Contributory vs. Noncontributory Plans

In a noncontributory plan, the employer pays 100% of the premium. Because coverage is free to employees, participation is automatic and 100% participation is required. The guaranteed inclusion of all eligible employees — healthy and otherwise — is what makes noncontributory coverage feasible without individual underwriting.

In a contributory plan, employees pay part of the premium through payroll deduction. Because participation is voluntary, insurers require at least 75% of eligible employees to enroll. This participation floor prevents the plan from filling only with high-risk employees who want coverage the most.

The Conversion Privilege

When a covered employee loses group life coverage — due to termination, reduction in hours, retirement, or plan cancellation — the law requires that they be offered a conversion privilege: the right to convert their group term coverage into an individual permanent policy (typically whole life) without evidence of insurability. No medical exam. No health questions. The insurer must issue the policy regardless of the employee's current health status.

The conversion must be requested within 31 days of coverage termination. The converting employee pays premiums at rates reflecting their attained age — their current age at the time of conversion — and individual permanent insurance pricing, not the group rate. This means conversion premiums are substantially higher than what the employee paid under the group plan. But for an employee who has developed a serious health condition during employment, conversion may be the only way to maintain life insurance coverage.

The 31-day window also provides a safety net: if the employee dies during the 31-day conversion period without having formally applied for conversion, many policies still pay the group death benefit.