3.3 Group Life Details and Limitations
Key Takeaways
- A group life inventory records end date, face amount, beneficiary, and additional benefits such as AD&D, dependent life, or survivor income — taken from the certificate and booklet, not from the employee's guess.
- Group life typically ends when employment or plan membership ends, at a stated age, or when the sponsor terminates or amends the plan; it is not individually owned permanence.
- Many certificates include a conversion privilege for a limited time after leaving the group, often without new medical evidence, into an individual policy at individual rates and within face-amount limits.
- Security is weaker than an individual policy the client owns: the employer or other sponsor can change or end the plan, and face amounts are commonly capped, salary-based, or reduced at older ages.
CISRO Life sub-component 1.2 treats group life as its own file, not as a footnote on the individual inventory. The group policyholder is the sponsor — usually the employer, sometimes an association or union. The employee holds a certificate under a master contract. That structure is why group coverage can be generous while the employee is a member and almost worthless the Friday after a layoff.
Coverage details to copy from the certificate
End date. Group life is temporary by design. Coverage commonly stops on termination of employment or membership, after a short layoff continuation if the booklet provides one, at retirement (sometimes replaced by a much smaller retiree amount), or at a stated age such as 65 or 70. Some plans reduce face amount at 65 rather than ending it. Write the actual end-date and reduction rules. "I have coverage at work" is not an end date.
Face amount. Basic group life is often a multiple of salary (for example 1× or 2× earnings) subject to a plan maximum. Optional employee-paid units may sit on top, sometimes with evidence of insurability above a non-evidence maximum. Dependent life, if any, is usually a modest spouse and child schedule, not a substitute for the spouse's own income-replacement need. Recalculate salary-based amounts when the client changes jobs, goes on reduced hours, or takes a bonus-heavy year that the plan does not include in "earnings."
Beneficiary. The employee usually may designate a beneficiary on the certificate. Defaults to estate are common when the form was never completed. An employer cannot always see or control that designation the way a policyholder can on an individual contract, but you still record who would be paid. A new spouse and an old designation is as dangerous here as on individual coverage.
Additional benefits. Inventory accidental death and dismemberment (often matching the basic life amount but paying only for accident, not illness), optional life, dependent life, and any survivor income benefit that pays a monthly amount for a limited period instead of a lump sum. AD&D is not "double life insurance for cancer." Survivor income that stops after two years does not fund a 20-year mortgage.
| Group field | Typical design | What to write on the fact-find |
|---|---|---|
| End date | Ends on leaving the group, at a stated age, or on plan termination | Last day coverage would pay, plus any reduction schedule |
| Face amount | Salary multiple with a cap; optional units extra | Basic, optional, and dependent amounts separately |
| Beneficiary | Employee designation; estate if blank | Primary and contingent as on the certificate |
| Additional benefits | AD&D, dependent life, survivor income | Trigger (accident versus any death) and duration |
Limitation: when it expires
The first limitation is time. Individual whole life that Dev owns can still be there after he resigns. His 2× salary group life generally is not, unless he is in a conversion window or a retiree class the plan actually offers. Seasonal work, contract employment, parental leave, disability leave, and a sale of the employer all need a booklet check: some plans continue basic life during an approved leave; many do not continue optional life. If Samira's household budget assumes Dev's $180,000 group face amount will still exist when he starts a consulting business, the existing-coverage assessment has already failed.
Limitation: convertibility upon termination from the group
Many Canadian group life certificates include a conversion privilege: for a limited period after coverage ends (often 31 days — confirm the certificate and the e-book, because the window is contractual), the employee may buy an individual life policy without new medical evidence, usually at attained-age individual rates, for an amount not exceeding the group amount being lost, and often only into a permanent product the insurer offers for conversions. Conversion is not a continuation of the group rate. It is a one-time chance to become an individual policyholder when evidence of insurability might otherwise be impossible. Missing the window after a termination is a common, expensive mistake. Conversion may also be narrower than clients hope: some plans exclude optional amounts, retiree amounts, or AD&D from conversion, and some cap the convertible amount well below the group maximum.
Limitation: security — the sponsor can change or terminate the plan
The curriculum's security point is blunt: the employer or other sponsor can terminate or change the group plan, and employees often have little practical notice or veto. Collective agreements and the master contract may impose process, but the exam contrast still holds. The client does not own the master policy. A new owner of the company, a cost-cutting benefits review, or a switch of insurers can cut the salary multiple, lower the non-evidence maximum, drop dependent life, or end the plan. Individual insurance the client owns cannot be rewritten by the employer. When you assess "appropriateness," a $400,000 group schedule that could be $0 after a board meeting does not carry the same weight as a $400,000 individual term Dev owns.
Limitation: limits on face amount
Group face amounts are capped. Non-evidence maximums stop guaranteed issue above a stated dollar amount. Overall plan maximums stop even evidenced coverage. Age reductions (for example to 50 percent at 65) shrink protection just as individual replacement cost is highest. Highly paid employees often discover that 2× salary is still far below a human-capital need, and that the excess they wanted required medical underwriting they never completed. Dependent schedules of a few thousand dollars do not insure a stay-at-home spouse's replacement cost.
Put Dev's booklet beside his individual term. Group basic life $180,000, AD&D $180,000 (accident only), dependent life $10,000 on Samira, conversion described as 31 days to an individual permanent plan up to the basic amount, reduction to 50 percent at 65, and a sentence that the employer may amend or terminate the plan. That is useful bridging coverage while he is employed. It is not a reason to skip individual convertibility, irrevocable-beneficiary, or tax-position work on the policies he actually owns.
An employee covered for basic group life resigns and does not convert. When does that group life coverage typically end?
What is the usual point of a group life conversion privilege when employment ends?
When you assess whether group life is appropriate as existing coverage, which pair of limitations belongs on the fact-find?