Legal Definitions - group insurance

Group insurance refers to a single insurance policy that provides coverage for multiple individuals who are part of a specific group. Instead of each person buying their own separate insurance, a qualified entity—such as an employer, a professional association, or a labor union—purchases one master policy from an insurance company. This master policy then extends benefits to all eligible members or employees within that group.

A key advantage of group insurance is that it typically offers more affordable premium rates and potentially broader coverage options compared to individual policies. This is because the insurer is covering a larger pool of people, which helps to spread the risk. Individuals covered by group insurance usually do not need to complete individual applications; instead, they receive a certificate of coverage that outlines their benefits and refers to the terms of the master policy held by the group. Coverage generally remains active as long as the individual maintains their eligibility within the group, for example, by remaining employed or a member of the association. The source definition indicates that group insurance often requires a minimum of 50 or more employees to qualify.

• Example 1: A University's Employee Health Plan

  State University, which employs over 5,000 faculty and staff members, offers a comprehensive medical, dental, and vision insurance package to all its full-time employees. The university contracts with a major health insurer to provide these benefits.

  How it illustrates group insurance: State University acts as the qualified group (an employer with more than 50 employees) that purchases a single master health insurance policy. All eligible employees are covered under this one policy, receiving benefits without needing to apply for individual plans. This arrangement typically results in lower premiums and better coverage options for the employees than they might find on the open market.

• Example 2: A National Bar Association's Professional Liability Coverage

  The "National Association of Legal Professionals," a professional organization with tens of thousands of attorney members across the country, offers its members the option to enroll in a group professional liability (malpractice) insurance plan.

  How it illustrates group insurance: Here, the National Association of Legal Professionals serves as the qualified group. It negotiates a master professional liability policy with an insurer, allowing its many members to obtain coverage under favorable terms. Members who opt in receive a certificate of coverage, benefiting from the collective bargaining power of the association rather than having to secure individual malpractice policies, which can be significantly more expensive.

• Example 3: A Firefighters' Union Life Insurance Benefit

  Local 456 of the "United Firefighters Union" provides a basic life insurance policy to all its active, dues-paying members as part of their union benefits package.

  How it illustrates group insurance: The United Firefighters Union, as a labor union, is the qualified group that holds a master life insurance policy. All eligible members are automatically covered under this single policy. This ensures that a death benefit is provided to their beneficiaries, demonstrating how a union can leverage group insurance to offer a valuable collective benefit to its members without each firefighter needing to purchase an individual life insurance policy.