West Virginia State Life Insurance Practice Exam

For an association to qualify for a group life insurance plan, what criterion must be satisfied?

1. Must have a charter established for insurance purposes

2. Formed for a purpose other than acquiring insurance

3. Membership must exceed 500 individuals

4. Must provide a minimum of 30 days’ notice before implementation

The correct answer is: Formed for a purpose other than acquiring insurance

To qualify for a group life insurance plan, the association must be formed for a purpose other than acquiring insurance. This criterion ensures that the group is a legitimate entity with a primary mission that extends beyond simply obtaining insurance benefits. The goal is to have a cohesive group of individuals joined together for common interests or activities, thereby allowing them to access more favorable insurance rates and coverage terms due to their collective membership. When an association is created with the primary focus of obtaining insurance, it may not fulfill regulatory requirements or the essence of group insurance, which relies on a variety of members being part of a shared interest or cause outside of insurance itself. This criterion protects the integrity of group insurance by ensuring it serves its intended function of providing coverage to members with commonality in reason for their association that is not solely based on insurance needs.