Group insurance

Group insurance covers a defined group of people — most commonly the employees of a single employer — under one master policy issued to the group's sponsor. The employer or sponsoring organization is the policyholder; the covered members each receive a certificate of insurance describing their benefits rather than an individual policy. Group life and group health coverage are the most familiar forms.

Underwriting works differently than it does for individual coverage. The insurer evaluates the group as a whole — its size, industry, demographics, and claims history — rather than requiring each member to prove insurability. Individual members generally join without medical exams, which makes group coverage accessible to people who might struggle to qualify individually. To limit adverse selection, insurers require that the group exist for a purpose other than buying insurance and set participation requirements.

Group insurance is typically less expensive per person than comparable individual coverage because administrative costs are spread across the group and the employer often pays part of the premium. A trade-off is portability: coverage is tied to group membership, so members who leave usually lose the coverage, though many plans offer a conversion privilege that allows departing members to convert to an individual policy without proving insurability within a set time frame.

Group insurance essentials — the master policy and certificates, group underwriting, participation standards, and conversion rights — are tested on state life and health insurance licensing exams, including the life-only, health-only, and combined life and health exams.