Apr 2, 2008


Group insurance contracts are very precise in their definition of what constitutes an eligible person for coverage purposes. In general, an employee must be in a covered classification, work full-time, and be actively at work. In addition, any requirements concerning probationary periods, insurability, or premium contributions must be satisfied.

Covered Classifications
All group insurance contracts specify that an employee must fall into one of the classifications contained in the benefit schedule. While these classifications may be broad enough to include all employees of the organization, they may also be so limited as to exclude many employees from coverage. In some cases, these excluded employees may have coverage through a negotiated trusteeship or under other group insurance contracts provided by the employer; in other cases, they may have no coverage because the employer wishes to limit benefits to certain groups of employees. No employee may be in more than one classification, and the responsibility for determining the appropriate classification for each employee falls on the policyholder.

Full-Time Employment

Most group insurance contracts limit eligibility to full-time employees. A full-time employee is generally defined as one who works no fewer than the number of hours in the normal work week established by the employer, which must be at least 30 hours. Subject to insurance company underwriting practices, an employer can provide coverage for part-time employees. When this is done, part-time is generally defined as less than full-time but more than some minimum number of hours per week. Part-time employees may be subject to more stringent eligibility requirements. For example, full-time hourly paid employees may be provided with $20,000 of life insurance immediately on employment, while part-time employees may be provided with only $10,000 of life insurance and may be subject to a probationary period.

Actively-at-Work Provision
Most group insurance contracts contain an actively-at-work provision, whereby an employee is not eligible for coverage if absent from work because of sickness, injury, or other reasons on the otherwise effective date of coverage under the contract. Coverage will commence when the employee returns to work. This provision is often waived for employers with a large number of employees when coverage is transferred from one insurance company to another and the employees involved have been insured under the previous insurance company's contract.

Probationary Periods
Group insurance contracts may contain probationary periods that must be satisfied before an employee is eligible for coverage. When a probationary period exists, it rarely exceeds six months, and an employee is eligible for coverage on either the first day after the probationary period or on the first day of the month following the end of the probationary period.

While most group insurance contracts are issued without individual evidence of insurability, in some instances underwriting practices require evidence of insurability. This commonly occurs when an employee fails to elect coverage under a contributory plan and later wants coverage or when an employee is eligible for a large amount of coverage. In these cases, an employee is not eligible for coverage until he or she has submitted the proper evidence of insurability and the insurance company has determined that the evidence is satisfactory.

Premium Contribution
If a group insurance plan is contributory, an employee is not eligible for coverage until the policyholder has been given the proper authorization for payroll deductions. If this is done before the employee otherwise becomes eligible, coverage commences on the eligibility date. During a period of 31 days following the eligibility date, coverage begins when the policyholder receives the employee's authorization. If the authorization is not received within the 31 days, the employee must furnish evidence of insurability at his or her own expense to obtain coverage. Evidence of insurability is also required if an employee drops coverage under a contributory plan and wishes to regain coverage at a future date.


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