Master Policy

Master Policy Group Insurance Employer Coverage Group Health Insurance Group Life Insurance Insurance Terms
A Master Policy is a single insurance contract that provides coverage on a group basis, typically issued to an employer, with group members receiving certificates summarizing the benefits provided.
On this page

Definition

A Master Policy is a single insurance contract that provides coverage to a group, usually employees of a company, rather than to an individual. This type of policy is issued to the employer (policyholder), who in turn offers the benefits to the group members (insured individuals). Each member receives a certificate of coverage as evidence of their inclusion in the Master Policy, which summarizes the benefits and terms of the policy.

Examples

  1. Group Health Insurance: An employer purchases group health insurance for all employees under a Master Policy. Each employee receives a certificate of coverage detailing their medical benefits, co-payments, and other key information.
  2. Group Life Insurance: A company provides life insurance to its employees through a Master Policy. Individual certificates are issued to employees indicating the amount of life insurance coverage provided.
  3. Group Dental Insurance: An organization offers dental insurance to its members via a Master Policy, ensuring that all members have defined dental benefits regulated under one single contract.

Frequently Asked Questions (FAQs)

Q1: What is the difference between a Master Policy and individual insurance policies?

  • A1: A Master Policy covers a defined group under one contract, while individual insurance policies are singular contracts between the insurer and one insured.

Q2: Can group members negotiate the terms of the Master Policy?

  • A2: No, group members typically cannot negotiate the terms of the Master Policy. The employer negotiates the terms with the insurer and extends coverage to all group members.

Q3: What happens to an individual’s coverage under a Master Policy if they leave the group (e.g., leave their job)?

  • A3: Coverage usually terminates when the individual is no longer part of the group, though there may be options for continuation or conversion to individual policies.

Q4: Are premiums for a Master Policy typically lower than for individual policies?

  • A4: Yes, premiums for a Master Policy can often be lower than individual policies due to the pooled risk among the group members.
  • Group Health Insurance: A type of insurance coverage provided to a group, frequently employees of a company, under a single policy.
  • Group Life Insurance: Life insurance coverage provided to a group of people under a single contract, often offered by an employer.
  • Certificate of Coverage: A document provided to individuals in a group insurance plan summarizing the key benefits and terms of the master policy.

Online References

Suggested Books for Further Studies

  1. “Fundamentals of Risk and Insurance” by Emmett J. Vaughan and Therese Vaughan
  2. “Insurance Theory and Practice” by Rob Thoyts
  3. “Group Insurance” by William F. Bluhm

Fundamentals of Master Policy: Insurance Basics Quiz

### Who is typically the policyholder in a Master Policy? - [x] The employer - [ ] The individual members - [ ] The insurance broker - [ ] The government > **Explanation:** The employer is usually the policyholder of a Master Policy, purchasing and holding the policy for the benefit of its group members (employees). ### What document do group members receive under a Master Policy? - [x] A Certificate of Coverage - [ ] The Master Policy itself - [ ] An individual policy contract - [ ] A claims manual > **Explanation:** Group members receive a Certificate of Coverage, which summarizes the major benefits and terms of the Master Policy. ### Can group members usually negotiate the terms of a Master Policy? - [ ] Yes, individually - [x] No - [ ] Yes, collectively as a group - [ ] Only select members can negotiate > **Explanation:** Group members typically cannot negotiate the terms of a Master Policy. The employer negotiates all terms with the insurer. ### What happens to a group member's coverage when they leave their job? - [x] It typically ends - [ ] It remains active indefinitely - [ ] They receive an individual policy to replace it - [ ] The employer keeps paying > **Explanation:** When a group member leaves their job, their coverage under the Master Policy typically ends. There may be options for continuation or conversion to individual policies, which would need to be explored separately. ### What type of insurance often uses a Master Policy? - [ ] Only car insurance - [x] Group health insurance - [ ] Homeowner's insurance - [ ] Travel insurance > **Explanation:** Group health insurance frequently uses a Master Policy to cover all eligible participants under one contract. ### Are premiums for a Master Policy generally higher or lower than individual policies? - [ ] Higher - [x] Lower - [ ] About the same - [ ] Variable depending on age > **Explanation:** Premiums for a Master Policy are often lower than those for individual policies due to the pooled risk across the covered group. ### Who defines the terms of coverage in a Master Policy? - [x] The employer and insurer - [ ] Each individual group member - [ ] The government - [ ] The insurance broker > **Explanation:** The employer and the insurer define the terms of the coverage in a Master Policy. Individual group members receive a Certificate of Coverage detailing their benefits. ### If an employer wants to offer dental benefits alongside health insurance, can they add it to the Master Policy? - [x] Yes, if both the employer and insurer agree - [ ] No, dental insurance must be separate - [ ] Only for companies with more than 100 employees - [ ] Only if state law permits > **Explanation:** An employer can add dental benefits to the Master Policy if both the employer and the insurer agree to include it in the terms. ### What is a primary reason employers opt for Master Policies over individual policies for employees? - [x] Lower administrative costs and premiums - [ ] Greater individual customization - [ ] Unique coverage exclusions - [ ] Higher payout limits > **Explanation:** One of the primary reasons employers opt for Master Policies is the lower administrative costs and premiums due to risk pooling among employees. ### What form of group insurance is a common example of utilising a Master Policy? - [x] Group life insurance - [ ] Workers’ compensation - [ ] Auto insurance - [ ] Renters insurance > **Explanation:** Group life insurance is a common example of a benefit frequently utilizing a Master Policy.

Thank you for exploring the concept of a Master Policy. For further insights and detailed comprehension of insurance fundamentals, consider delving into the suggested readings and online resources.

Wednesday, August 7, 2024
Master-Servant Rule
Master Plan
Group Life Insurance January 1, 1

Accounting Terms Lexicon

Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.