South Carolina Life Insurance Practice Exam

Who owns a group life insurance contract?

1. The employer

2. The insured individuals

3. A union

4. An insurance broker

The correct answer is: The employer

In the context of group life insurance, the ownership of the contract typically lies with the employer. This structure is designed to provide life insurance coverage for a group of individuals, which in most cases includes employees of the organization. The employer enters into a contract with the insurance company to provide coverage, and this contract outlines the terms, premiums, and benefits associated with the insurance. Employers often choose group life insurance to offer employees an affordable and often subsidized benefit, which can enhance employee morale and attract talent. Since the employer is responsible for the payment of premiums and has the authority to make decisions regarding the plan, such as enrollment and benefit levels, they are recognized as the owner of the group policy. Insured individuals under the policy do not own the contract; instead, they are beneficiaries of the coverage provided by the group policy. A union can be involved in group life insurance if the insurance is provided through a union contract, but it does not usually own the policy unless expressly stated. As for an insurance broker, they may facilitate the transaction but do not own the insurance contract either. Therefore, the employer's status as the contract owner is a fundamental aspect of how group life insurance is structured and administered.