Employee Benefit Solutions Manual for Traditional Group Products

Transcription

1 Employee Benefit Solutions Manual for Traditional Group Products December 1, 2011 UNDERWRITING MANUAL FOR INTERNAL USE ONLY NOT FOR DISTRIBUTION TO THE PUBLIC Policies issued by: American General Life Insurance Company of Delaware American International Life Assurance Company of New York The United States Life Insurance Company in the City of New York

2 Table of Contents Page General Information... 1 The Trusts... 1 Geographic Availability... 1 Eligible Groups... 1 Ineligible Groups... 1 Eligible Employees... 2 Classification of Employees... 3 Employee and Dependent Participation and Contribution... 3 Waiting Peiod... 3 Effective Dates for New Groups... 4 General Underwriting Guidelines... 4 Special Considerations Regarding Non-Profit Groups... 6 Industry Restrictions... 6 Glossary of Insurance Terms... 7 Life and Accidental Death and Dismemberment (AD&D) Insurance Availability Benefit Levels and Schedules Participation Requirements Basic, Supplemental and Voluntary Life and AD&D Eligibility Traditional Life Plan Provisions Traditional AD&D Plan Provisions Additional 2 9 Underwriting Guidelines Supplemental Life Plan Provisions Supplemental AD&D Plan Provisions Additional Supplemental Provisions Voluntary Life Plan Provisions Voluntary AD&D Plan Provisions Voluntary Standalone AD&D Plan Provisions Additional 10+ Underwriting Guidelines Definition of Basic Annual Pay Age Reduction Superimposition Times Rule (New York Cases Only) Waiver of Premium Provision Dependent Life State Limitations for Dependent Life Insurance Domestic Partner Coverage Retiree Coverage for Employee Paid Life Benefits AD&D Benefits Seat Belt Benefit Common Carrier Benefit

3 Table of Contents (continued) Page Accelerated Death Benefit High Maximum Issue Group Life Insurance Medical Underwriting Requirements for Life Amounts Subject to EOI Dental Insurance Introduction Plan Availability Underwriting Guidelines Plan Types Plan Description Commissions Pricing Rate Structure State Availability Grid Employer-Funded Plans Employee-Paid Plans SmileMaker State Restrictions Glossary of Dental Terms Vision Insurance Introduction Plan Designs Available General Information Eligibility Underwriting Guidelines Vision Plan Features Summary Glossary of Vision Terms

4 Table of Contents (continued) Page Short-Term Disability (STD) Insurance Availability Lives Lives Voluntary Short Term Disability Plan Maximum Weekly Benefit Calculation Underwriting Guidelines All Plans Exclusions All Plans Definitions States That Mandate Optional Maternity Benefits for Disability Quoting Procedures Glossary of Disability Terms Long-Term Disability (LTD) Insurance Introduction Requirements Participation Requirements Risk Solution Lives Lives Voluntary Plan Plan Design Options Reinsurance Core Buy-Up Plans Monthly Earnings Quoting Checklists Quoting Procedures Medical Underwriting Requirements for LTD Amounts Subject to EOI General Industry Categories Special Circumstances Underwriting Guidelines Occupational Coding Occupational Classes Unacceptable Occupations (All-Size Groups) SIC Listing Master copy location: GS: C:\Underwriting Manual\Underwriting Manual December 2011 GS: C:\Underwriting Manual\SIC December 2011 Last update: December 1,

5 General Information The Trusts Business written on American General Life Insurance Company of Delaware (AG) or American International Life Assurance Company of New York (AIL) paper is issued via a trust according to product. This is unlike business on The United States Life Insurance Company in the City of New York (USL) paper, in which groups are put into a trust according to their nature of business. The AG/AIL trusts are as follows: G-660,020 (Non-Voluntary LD) G-660,021 (Voluntary LD) G-660,022 (Voluntary STD) G-660,023 (Non-Voluntary STD) G-660,024 (Voluntary LTD) G-660,025 (Non-Voluntary LTD) G-660,026 Dental (Non-Voluntary Indemnity) G-660,027 Dental (Non-Voluntary PPO) G-660,028 (Vision) G-660,029 Dental (Voluntary PPO) G-660,030 Dental (Voluntary Indemnity) G-660,031 Dental (Indemnity plans without major) The USL trusts, for historical purposes, are as follows: Service Industry (SG) Retail Industry (RG) Wholesale Industry (WG) Groups must qualify as employer/employee entities in order to be eligible to purchase coverage, regardless of the issue paper. Final placement into each trust will be determined by the Home Office Group Underwriting Department. Geographic Availability These trusts can be written for all of our products and are available nationwide. The trusts are not available in Puerto Rico or Canada (dual language issue requirements) or the Virgin Islands (not licensed for new business). Eligible Groups In general, most employers are eligible to participate in one of the trusts, but employers in certain industries must be excluded; these are outlined in the industry restriction section. Affiliates, subsidiaries and divisions of a prospective participating employer are eligible for coverage if they engage in related activities. Common ownership of unrelated entities may not qualify. Questions concerning the eligibility of a given employer should be directed to the Home Office Group Underwriting Department. A subsidiary or a division of a company may not be considered for coverage on its own; they would be subject to prior Home Office approval. Subsidiaries and divisions of foreign-based parent companies are acceptable entities. In addition, branch offices of a company may not apply for coverage unless all the branches apply. Ineligible Groups Participation in a trust is not available for any group unless a strict employer/employee relationship is present. For example, unions, welfare funds and membership associations may not participate under any circumstances. 1

6 Eligible Employees To be eligible for insurance, an employee must meet the following criteria: ACTIVE WORK or ACTIVELY AT WORK means that the person performs each duty of his job for full pay. This must be done at the participating employer s place of business or any place to which such business requires him to travel. Business with 50% or more Family content will be required to submit acceptable wage and tax (ineligible for Disability). FULL-TIME means active work and on the participating employer s regular work schedule for the class to which the employee belongs. The work schedule must be at least 30 hours a week (mandatory for STD and LTD). Any other schedule must be called into Underwriting. NOTE: Seasonal businesses, such as landscapers, must provide a letter on company letterhead, signed by an owner, verifying that the business operates year-round. As such, only those employed year-round will be eligible. This verification is mandatory for Disability, and up to the Underwriter s discretion for other coverages. Regardless of coverages sold, it is strongly suggested to furnish this verification upon initial submission of a new case for the most expedient processing. A COMMISSIONED SALESPERSON (or other person paid via 1099) is not normally eligible for benefits under our contract. We will consider a 1099-waged individual to be eligible if they work exclusively for the participating employer. Documentation may be required proving the exclusivity of the work arrangement; namely, a signed statement from an officer, on company letterhead, confirming that the 1099 employee works solely for their place of business, full-time, year-round. The officer cannot be related to the employee. Further payroll documentation may be required at the Underwriter s discretion. Any 1099 earning pay from multiple employers does not fit our description of a full-time, year-round employee. Typically, these employees would not be eligible for STD or LTD unless they earn W-2 wages. In addition, 1099 waged individuals do not earn salary; therefore they would not normally qualify for a salary based Life schedule. A separate schedule is usually developed, and the 1099 should be employed for at least two years when considering a salary-based schedule. Because of the risk of fluctuation in earnings from year-to-year, covering 1099/commissioned salespeople for salary-based schedules is difficult to service and renew. Please contact the Small Group Underwriting area for help in addressing these situations. Groups requesting consideration must conform to all of the previously mentioned requirements, as well as any additional requirements identified by the Underwriter. Job Titles: Job titles for every applicant are mandatory for 2-9 Life and AD+D and all Short Term Disability and Long Term Disability. Dental, Vision and 10+ Life and AD&D coverages do not require job titles unless the group is class distinct. NOTE: THE HOME OFFICE GROUP UNDERWRITING DEPARTMENT MAY REQUEST JOB TITLES, A GROUP EMPLOYER REPORT, INDIVIDUAL EMPLOYEE AUDITS, GROUP PAYROLL REVIEWS AND ELIGIBILITY STATEMENTS IN ORDER TO ELIGIBALIZE AN INDIVIDUAL OR GROUP DEPENDING UPON THE CIRCUMSTANCES OF THE CASE. 2

7 Classification of Employees Employee classifications must be well defined. For example: ACCEPTABLE CLASSES President, Vice Presidents Supervisors, Managers, Assistant Supervisors & Foremen UNACCEPTABLE CLASSES Executives, Principals Management Officers Groups may be written with all employees eligible or with certain classes of employees eligible and certain classes excluded. The designated class or classes must meet standard classification guidelines, namely: The class or classes must be based on conditions pertaining to employment The class or classes must be consistent with normal business judgment or reasoning relative to compensation and fringe benefits provided to employees The first class must include the employer s highest-level personnel (e.g., President) and the subsequent classes must proceed downward through the employer s organization, following its actual hierarchical structure Reverse carve-outs (excluding high-level employees) are typically not allowed due to the risk of adverse selection. In instances where the owners or officers wish to waive out of the plan, the plan will be written as contributory and normal participation rules will apply. For noncontributory plans, Underwriting requires carrier proof that all excluded personnel are covered under another plan, either Individual or Group. If the top class of employees are applying for one coverage but wish to be excluded from another, for example, enrolling for Life but being excluded for Dental, we will consider. To be written, such groups must qualify under all guidelines. Seasonal, part-time and temporary employees will always be excluded. Employee and Dependent Participation and Contribution Non-Contributory: For cases or coverages written on a non-contributory basis (100% employer paid), all eligible employees and, if applicable, all eligible dependents must be insured. Spouses who are separated but not divorced will be considered eligible dependents and must be insured. Contributory: 75-percent employee and dependent participation is required. Refusal of insurance cards must be completed in their entirety for those waiving coverage. Those with Group Coverage elsewhere will be considered as participating in our calculations. Waiting Period Usually, there is no required waiting period for full-time employees to be insured on the effective date. The employer may, however, request a waiting period for these employees. For new employees, the standard waiting period is one month. However, other waiting periods may be selected, such as two months or three months. Waiting periods must be administered in a monthly format. Days or weeks cannot be accommodated. First-of-the-month is only available for plans that bill on the first day of the month. If a waiting period is requested for present employees, all employees who have been employed for at least that length of time are eligible for insurance on the effective date. Dates of hire will be required for all employees. 3

8 Effective Dates for New Groups The group application allows the employer to choose between two options for the effective date of the case: Date Approved or Date Certain For non-takeover cases, it is suggested the Dated Approved option be used. The option, once chosen, may not be changed. Back-dating is never permissible. When we are taking over coverage from another carrier, our effective date must coincide with the termination date of the prior carrier s coverage. A current carrier bill showing a current paid-to-date is required for all takeover coverage. All groups selecting the Date Certain option must be received in underwriting 15 days prior to, or business day next following, of the proposed effective date. Cases received later will be required to change their effective date. If cases are not received within this time-frame, eligibility confirmation and issue may be further delayed. General Underwriting Guidelines It is important to note that while cases may be underwritten without evidence of insurability, this does not imply that all cases will be accepted. Only those cases, which meet the company s underwriting standards, will be accepted and the company does reserve the right to decline or modify any case. Gatekeeper Application Questions If the application has a yes answer to the gatekeeper question the case should not be submitted to the Home Office until a medical Underwriter in Small Group Underwriting is called. This question must be answered for 2-50 Life and 2-9 Disability cases. Consolidated Omnibus Budget Reconciliation Act (COBRA) and State Continues are not exempt from these questions. Takeover groups where we are replacing EXACT coverage are exempt from answering this question. The application must be signed and dated by an officer, proprietor or partner of the company otherwise it will be returned for the appropriate signature and date. The Sales Representative will give information as to the nature of the individual s problem. The Underwriter will determine whether the case can be submitted as is, not submitted at all, or held for further information. If the case is held for further information, the Sales Representative must do the following: Return the deposit check to the group Submit Evidence of Insurability for the person involved, along with a photocopy of the group s application and any other information which would aid a medical decision. Or, employee may furnish complete medical records in lieu of the EOI, which ensures a faster decision. If there is a takeover situation, immediately tell the group to keep their existing coverage When all the information required by the Underwriter has been sent to the Home Office, the Underwriter will notify the Sales Representative whether the case can be submitted 4

9 Retiree Coverage Retiree coverage will only be considered for employer paid Life and Dental benefits only.retiree coverage must be pre-approved by Home Office Underwriting and will only be considered based on the following underwriting rules: Life: See page 26 in the Life section. Available to 10+ enrolled groups. May quote retirees for Life coverage if retiree volume makes up 5% or less than the total volume. Must be take over with proof of a current carrier booklet and bill. Closed class. Dental: Available to 10+enrolled groups. May quote retirees for Dental coverage if retiree enrollment makes up 5% or less than the total enrollment. Must be take over with proof of a current carrier booklet and bill. Closed class. STD; LTD; Vision: No retiree coverage permitted. Takeover Groups For groups previously insured under a group insurance contract immediately preceding the effective date of coverage in regards to any pre-existing exclusion provision, we will give credit for prior coverage. In addition, deductible and coinsurance credit will be provided for dental. Employers of takeover groups must submit their prior carrier bill paid to our proposed effective date regardless of the size of group or coverage elected. For Dental Coverage, a complete copy of the prior carrier s certificate of coverage must be provided in order to determine whether or not takeover will apply. Cases Not Taken Out (NTO) In order to maintain a high service standard in new case issue, it is imperative that all medical and nonmedical requests for additional information be fulfilled promptly. Timely issue of new cases enhances our desirability as a carrier in the marketplace. Cases that cannot or choose not to comply with our underwriting requirements will always exist. These cases will eventually be closed out (NTO). Unfortunately, these cases take valuable time away from the cases that do comply with our requirements. Of course, until the actual time that a case is closed out, there is no way of knowing if that case can be salvaged. Accordingly, all new cases which have been pending in the Underwriting Department for a designated period of time will be reviewed once a week for the purpose of determining whether to continue to pend the case or to advise the group Sales Representative that the file should be closed. The choice to continue to pend or to close out will usually be made as a result of discussion between the Underwriting Department and the Sales Representative. The purpose of the weekly NTO review is to sort out the few cases that will ultimately be closed out. This gives us more time to expedite the cases that will be issued. Refunds of premium deposits for cases NTO'd by Group Underwriting or withdrawn by the applying employer will be made 21 days after the initial premium check is deposited by the Group New Business desk. If the employer requests a refund in less than 21 days, the name and phone number of his bank and his account number must be submitted to the home office. Re-Opened NTO Cases In order to re-open a case that has been "Not Taken Out" the following must occur: Submit all outstanding requirements to the original Underwriter The Underwriter will call to advise whether the case can be approved If it is acceptable, a current effective date will be assigned. We will need an effective date letter confirming the policy effective date. A check must be forwarded to the Underwriter to reopen the file A new policy number will be assigned A message will be forwarded to the appropriate office advising of the approval, policy number and effective date. 5

10 Special Considerations Regarding Non-Profit Groups Non-Profit groups pose an additional risk in that should the group s funding be reduced or eliminated, the Company is put under the added burden of continuing disability or waiver of premium claims without receiving premium in return. Therefore, any Non-Profit in business for less than three years must provide documentation on their company letterhead outlining the following: All sources of funding Percentage of funds received through government channels (we prefer no more than 50%) Full disclosure of long- and short-term revenue projects, if applicable. NOTE: Please refer to page 130 in the LTD section for specific instructions when reviewing a Non-Profit for disability coverage. Underwriting reserves the right to request this documentation on any group, regardless of number of years in business, when needed to mitigate foreseeable risk. NOTE: The Non-Profit letter will not be required for Life, AD&D, Dental and Vision coverages. Industry Restrictions Each coverage in this manual has an industry restriction list to serve as a sales force guide to situations, which should be avoided so that the effectiveness of their efforts and those of our Home Office people can be maximized. Most industries can be written at standard manual rates. However, certain industries present either underwriting or administrative problems, which cannot be solved by normal techniques. Proper underwriting requires that we limit or avoid exposure to situations if: Extra premium is required because of anticipated adverse mortality and morbidity Unusual fluctuations in loss experience are known to occur Administrative costs cannot be properly controlled The Company is likely to be left with unamortized acquisition costs EXAMPLES The work is inherently dangerous and hazardous (examples: logging, miners, long-haul truck drivers and drillers) There is an exposure to working conditions or materials which may cause occupational disease There is a catastrophe hazard (example: professional athletes) The nature of the work is temporary or the coverage as written can be presumed to be temporary The work force is, in general, seasonal or part-time, or excessive turnover can be anticipated The employer commonly contributes a small (or no) percentage towards the cost of insurance and other similar situations where a high degree of selection can be anticipated The employer is experiencing financial hardship There are numerous employees working out of their homes If for any reason, the industry being quoted seems questionable, the Home Office Underwriting Department should be contacted. 6

11 Glossary of Insurance Terms Accelerated Death Benefit An enhancement to the Group Life Insurance that allows insured people to receive a portion of their Group Life insurance benefits if they (1) become terminally ill, (2) are unable to perform one or more Activities of Daily Living (ADL), without standby help, or (3) have a Cognitive Impairment. The benefit may be paid if the insured is unable to perform one or more of the activities of daily living, or have a cognitive impairment, or is terminally ill. If the insured is terminally ill, meaning life expectancy is six months or less from date of application, the insured must provide proof of terminal illness. Proof of Terminal illness must be certified by a physician; proof of other qualifying conditions must also be certified by a physician. Accident An event or occurrence that is sudden, unforeseen and unintended. Active-Work/Actively-at-Work Requirement Under this requirement, coverage will not become effective unless the employee is performing normal duties for the employer at the usual place of employment or at an alternative work site at the direction of the Employer or at a location to which the Employer requires the Insured to travel. Part-time employees who are eligible for group life insurance must be actively at work on a part-time basis. Coverage will not be effective until this requirement is met. Activities of Daily Living Means the following activities. Bathing The ability to wash oneself in either a tub or shower, or by sponge bath; including the tasks of getting into and out of the tub or shower with or without the assistance of equipment. Dressing The ability to put on, take off, and secure all necessary and appropriate items of clothing and any necessary braces or artificial limbs. Toileting The ability to get to and from the toilet, get on and off the toilet, and perform associated personal hygiene with or without the assistance of equipment. Transferring The ability to move in and out of bed, chair, or wheelchair with or without the assistance of equipment. Mobility The ability to walk or wheel on a level surface from one room to another with or without the assistance of equipment. Eating The ability to get nourishment into the body by any means once it has been prepared and made available to one with or without the assistance of equipment. Continence The ability to voluntarily maintain control of bowel and/or bladder function or, in the event of incontinence, the ability to maintain a reasonable level of personal hygiene. Age Discrimination in Employment Act (ADEA) Federal Act, effective 1967, that limits discrimination in plan design based on age. Age Reduction The reduction of benefits when an insured individual reaches a specified age. Basic Life Plan Coverage that provides a payment to a person designated by the employee if the employee dies from any cause. Beneficiary The person who receives the death benefit when an insured dies while covered under an Applicable AG/AIL life benefits plan, or the person who will receive those benefits automatically under the terms of the applicable plan. Employees can designate a primary beneficiary and a contingent (or secondary) beneficiary. The contingent beneficiary will receive the death benefit if the primary beneficiary dies before the employee. Benefit The amount an insurer pays a claimant, assignee or beneficiary under each coverage in the group contract. Census Data, such as age, sex, occupation, earnings, geographic location and dependency status. 7

12 Contributory Contributory coverage requires employee contribution to pay all or part of the cost of the insurance premium. Common Carrier Any land, sea, or air conveyance operated under a license for the transportation of passengers for hire. Covered Classes Group of employees who are eligible for coverage. Death Benefit Full Group Life and AD&D payment that is made when an employee dies. Dependent Child(ren) The Insured s unmarried children, including natural, step, foster or adopted children from the moment of placement in the home of the Insured, under age 19 (or 23 if attending an accredited institution of higher learning on a full-time basis) and primarily dependent on the Insured for support and maintenance. Dependent Group Life Coverage that provides a payment to the employee if a covered dependent dies. Domestic Partner An opposite or same sex partner who has met all of the following requirements: (1) resides with You; (2) shares financial assets and obligations with You; (3) is not related by blood to You to a degree of closeness that would prohibit a legal marriage; (4) is at least the age of consent in the state in which they reside; and (5) neither You or your Domestic Partner is married to anyone else, nor has any other Domestic Partner. Earning Plan Schedule of life insurance under which the insured amount is relative to an individual's salary (example: 2 1/2 times the employee's annual salary). Effective Date Date on which coverage under a policy or for an individual first becomes inforce or effective. Employer Any person who employs others to work for wages or salary and acts in the employees' interests in relation to an employee benefit plan. Can include a group or association of employees acting for an employer in such capacity. Employment Waiting Period The period of continuous, full-time service that must be completed before an employee is eligible for coverage. Also referred to as the service waiting period. Enrollment The process of explaining the proposed group insurance plan to eligible persons and assisting them in properly completing applications for coverage. May also refer to the population covered by an insurance plan. Evidence of Insurability A statement or proof of a person s medical history upon which acceptance for insurance will be determined by the Company. Exclusion Specific condition or circumstance for which the contract does not provide benefits. 8

13 Extended Death Benefit One-year extension of the death benefit during a period of total disability that occurs only if certain conditions are met. Family Coverage Coverage in force under the Policy on an Insured s Eligible Dependents: 1) whom the Insured has elected to cover under the Policy; and (2) for whom premium has been paid. Flat Amount Group Life insurance plans where the amount of insurance is identical for all eligible employees (in a class), regardless of income earning brackets. Also known as a flat plan. Grace Period The 31-day period following the premium due date, during which the premium can be paid without penalty. Group Contract The contract(s) or agreement (s), including any Booklets or Certificates, which govern the benefits and extent of coverage under the group plan. Group Life Insurance Coverage that provides a payment to a person designated by the employee if the employee dies from any cause. Guarantee Issue Amount The amount of insurance that will be issued to an Insured Person without Evidence of Insurability. The Guaranteed Issue Amount for an Insured Person s Life Insurance is shown in the Schedule. Imputed Income The amount an employer plan costs paid for life insurance that are considered employee compensation and reported as income tax liability for the employee. Industry Factor A rate adjustment that takes into account the variances in mortality and morbidity by industry. Inforce Period Time period for which an insurance policy or plan is effective. Injury Bodily injury that is the direct result of an accident occurring while the Policy is in force with respect to the person whose injury is the basis of claim and resulting directly and independently of all other causes in a covered loss. Insured A person who is a member of an Eligible Class and for whom a premium has been paid while covered under the Policy. Late Entrant Employee who did not enroll for contributory coverage within 31 days of eligibility, but later decides to apply for it. The late entrant must furnish Evidence of Insurability at the time of application. Limiting Age Age at which a child of an insured individual can no longer be covered as a dependent. List Billing Home office billing whereby the policyholder receives a monthly bill that lists the insured by product and the amount of premium billed. Medical Evidence see Evidence of Insurability Military The armed land, sea or air force of a nation. 9

14 Multiple of Earnings Plan type where benefit amount are determined by multiplying an employee's annual earnings (excluding overtime pay or bonuses) by a constant. New Issue Business resulting from the sale of coverage to a new client. Non-Contributory Coverage Coverage for which employer pays the entire cost of the employee s group insurance benefits. With this type of plan, all eligible employees must be covered. Non-Medical Limit Maximum amount of life insurance that an individual can apply for without having to submit medical evidence of insurability. Non-Occupational Coverage For a sickness or injury not related to work. Occupational Coverage For a sickness or injury that occurs on the job. Open Enrollment A period of time, usually one month each year, during which eligible employees may elect to change a benefit plan option offered by the employer for a prospective plan year. Depending on the line of coverage, those employees may be subject to some conditional requirement, such a preexisting conditions. Paramilitary An organized, armed force on a military pattern. Physician A licensed practitioner of the healing arts acting within the scope of his or her license, who is not: (a) the Insured Person, (b) an Immediate Family Member, (c) residing with the Insured Person, or (d) retained by the Policyholder. Plan A description of benefits. Policy Anniversary Date The same month and day as the Policy Effective Date in all subsequent years. Portability Provision Provision that gives an insured employee whose employment ends the ability to continue coverage. Usually subject to limitations. Premium The financial payment that is due from the policyholder, usually on a monthly basis. It is intended to provide sufficient funds to cover normal cost of insurance programs and is calculated by multiplying the inforce lives or volume by the premium rate. Prior Plan The Group Life Insurance carried by the Employer on the day before the Policy Effective Date. Proposal A bid made for a group plan in which American General quotes rates for the benefits desired by the prospect. Reinsurance An arrangement where two or more insurance companies share the insurance risk. Rider An attachment to a certificate that indicates that a certificate has been revised to include changes. Roster Billing (see List Billing) Schedule The Schedule of Benefits section of the Policy. Sickness Illness or disease diagnosed by a Physician. Supplemental Life Insurance Contributory life insurance coverage provided in addition to a life plan. A Group Life insurance plan that allows employees to purchase additional amounts of insurance beyond 10

15 those provided under the Basic Life Plan. In order to have Supplemental Life Insurance, there must be an underlying Basic Life Plan. Voluntary Plan 100% employee-paid insurance offered at the worksite as part of the employer s benefit plan. Waiver of Premium Optional feature designed to help disabled employees avoid the financial hardship of life insurance payment during disability. Generally, the employee is totally disabled for a continuous nine-month period, is less than 60 years of age, and is insured under Life insurance Coverage at the time of disability. Coverage is generally extended with no cost of insurance due. War or Insurrection An armed conflict between the military or paramilitary forces of two (2) or more political entities. 11

16 Life and Accidental Death and Dismemberment (AD&D) Insurance Availability AG/AIL group life plans are rated based upon age, gender, and the industry SIC code. If there is a question on the SIC code, Underwriting reserves the right to assign rates based on an accurate code. Plans are available to Groups where an employee/employer relationship exists between those covered by the plan and those using the plan. Groups with a Family content of 50% or greater will require submission of acceptable wage and tax documentation. Groups fewer than 500 lives are manually rated. Groups of 500 lives and over are experience rated. Benefit Levels and Schedules The amount of insurance for each employee must be determined by a formula based on conditions pertaining to employment and not on individual selection. We will issue Life Insurance Plans with flat schedules, salary schedules, occupational schedules or combinations. Participation Requirements If the employees pay all or part of the premium, at least 75% of eligible employees and dependents, (if sold with Dependent Life), must enroll for coverage. If the entire cost of the plan is paid by the employer, all eligible employees and dependents, (if sold with Dependent Life), must enroll for coverage. Basic, Supplemental and Voluntary Life and AD&D Eligibility Basic Life/AD&D must be in effect in order for Supplemental to be available for the employee and eligible dependent(s). If Basic coverage is medically declined, or refused, then the applicant is ineligible for Supplemental coverage (and Voluntary coverage for declinations). When a group purchases Basic and Supplemental together, buying an additional Voluntary plan is strictly prohibited. No exceptions. If a group purchases Basic only (no Supplemental), they may purchase an additional Voluntary plan. Basic Life/AD&D plan provisions follow. Supplemental plan provisions start on page 16. Voluntary plan provisions start on page

17 Traditional Life Plan Provisions (Employer Paid) Plan Schedule Flat Amount Maximum Salary-Based Maximum Minimum Amount Waiver of Premium Accelerated Death Benefit Guarantee Issue Age Reduction Conversion Portability Spouse Maximum Amount (subject to state availability) Up to 5 times salary $50,000 (2-4 enrolled lives) $100,000 (5-9 enrolled lives) Up to $500,000 (10+ enrolled lives) Up to $100,000 (2-4 enrolled lives) Up to $200,000 (5-9 enrolled lives) Up to $500,000 (10+ enrolled lives) $10,000 (standard for all groups) $1,000 to $10,000 (option for all groups) To age 65 (standard 2+ lives) To age 70 (option 10+ lives) Includes terminal illness, or unable to perform one or more ADL, or a cognitive impairment 75% to $250,000 (standard for all groups) 50% to $250,000 (optional for 10+ lives) Virgin $10,000; takeover up to $50,000 (2-4 enrolled lives) (group GI= $10,000; may take over an individual employee amount up to $50,000 based on current carrier list bill) Virgin $75,000; takeover up to $100,000 (5-9 enrolled lives) (group GI= $75,000; may take over an individual employee amount up to $100,000 based on current carrier list bill) Calculation based on group size and participation (10+ enrolled lives) 35% at age 65, 50% at age 70 (standard for all groups) No age reduction (flat plans under $50,000) 50% at age 70 (all groups) 25% at age 70, 50% at age 75 (10+ lives) 8% per year from age 65, 50% at age 70 (10+ lives) 50% at age 75 (10+ lives) Included in all plans May be considered (250+ enrolled lives only and currently inforce) Up to $10,000 (2-9 enrolled employee lives) Up to $50,000 (10+ enrolled employee lives) Child(ren) Maximum Amount Up to $10,000 Spouse Guarantee Issue Domestic Partner Coverage $10,000 (2-9 enrolled employee lives) $20,000 (10+ enrolled employee lives) Optional for all groups where available 13

18 Rate Guarantee Employee Assistance Program (EAP) My Life Values Instant Access Account 24 months (standard for all groups) 12 months (optional for all groups) 36months (optional for 10+ enrolled employee lives) Not available (2-9 enrolled employee lives) Telephonic EAP / online Work/Life services (10+ enrolled) Telephonic EAP / full Work/Life services (10+ enrolled) Face-to-face EAP / full Work.Life services (10+ enrolled) Included (2-9 enrolled employee lives) Not available (10+ enrolled) Included all plans Notes: Employee must enrolled in Basic Life and AD&D for spouse to be eligible for coverage. All Life or AD&D maximums in excess of standard product offerings must be review by Home Office. Any insured receiving approved Life or AD&D amounts over $500,000 Basic or $500,000 Basic and Supplemental or Voluntary combined must be reported to Neptune Life Reinsurance. 14

19 Traditional AD&D Plan Provisions AD&D Amount AD&D Maximum Amount Definition of Loss Airbag and Seatbelt Benefit Loss Due to Exposure and Disappearance Age Reduction/Termination Tier One Provisions (option for 10+ lives) Tier Two Provisions (option for 10+ lives) Spouse and/or child AD&D Same as Traditional Life (standard for all groups) 150% of Traditional Life (10+ enrolled lives) 200% of Traditional Life (10+ enrolled lives) Same as Traditional Life (2-9 enrolled lives) $500,000 (10+ lives) 365 days $10,000 for both Included (all groups) 35% at age 65, terminates at age 70 (2-9 lives) Same as Traditional Life (10+ lives) Repatriation of remains actual cost up to $5,000 Spouse tuition actual cost up to the lesser of 5% employee amount or $5,000 Childcare actual cost up to the lesser of 5% employee amount or $2,500 Child education actual cost up to the lesser of 5% employee amount or $5,000 All of Tier One provisions, plus: Permanent and total disability = 1% of principal amount Paralysis benefits (Quadriplegia 100%; Paraplegia 50%; Hemiplegia 50%; Uniplegia 25%) Common carrier lesser of $250,000 or plan maximum Not available Additional 2-9 Underwriting Guidelines Three times between classes for 2-4 lives; maximum 5 classes Spread between classes may be greater than three times for 5-9 lives, although the maximum may not exceed $100,000 for the top class AD&D terminates at age 70 No retirees Ineligible industries (see page 6) When replacing coverage, we will grandfather amounts, according to the schedule above, with proof from the prior carrier. Underwriting reserves the right to require EOI for any amount over replacement amounts stated above. If Basic coverage is medically declined, or refused, then the applicant is ineligible for Supplemental or Voluntary coverage(s). This applies to both 2-9 and 10+ groups. 15

20 Supplemental Life Plan Provisions Plan Schedule Incremental Plan Maximum Supplemental Amount Up to 5 times salary Increments of $10,000 up to maximum amount Up to $100,000 in $10,000 increments (2-9 enrolled lives) Up to $300,000 in $10,000 increments (10+ enrolled lives) Minimum Supplemental Amount $10,000 Waiver of Premium Accelerated Death Benefit Guarantee Issue (*10 employees must enroll in the Supplemental Life benefit to be eligible for guarantee issue.) Age Reduction Conversion Portability Spouse Supplemental Maximum Amount (state limitations apply) Spouse Increments Children Supplemental Maximum Amount (State limitations apply) Spouse Guarantee Issue Domestic Partner Coverage Must match the Traditional Life option Must match the Traditional Life option Includes terminal illness, or unable to perform one or more ADL, or a cognitive impairment 2-9 eligible lives - None eligible lives 10 enrolled EE s required for GI* Less than 20% participation: $50,000 20% or greater participation: $100, eligible lives 10 enrolled EE s required for GI* Less than 20% participation: $100,000 20% or greater perticpaiton: $150,000 Must match the Traditional Life option Included Excluded (2-9 lives) Available as an option (10+ lives) $10,000 (standard for all groups) Up to $50,000 (2-9 eligible employee lives) Up to $300,000 (10+ eligible employee lives) In $5,000 increments up to spouse maximum amount Up to $10,000 None (2-9 enrolled employee lives in EE Supp.) $20,000 (10+ enrolled employee lives in EE Supp.) Optional for all groups where available 16

21 Supplemental AD&D Plan Provisions AD&D Amount AD&D Maximum Amount Definition of Loss Airbag and Seatbelt Benefit Loss Due to Exposure and Disappearance Age Reduction/Termination Tier One Provisions (option for 10+ lives) Tier Two Provisions (option for 10+ lives) Spouse and/or child AD&D Same as Supplemental Life (standard for all groups) 150% of Supplemental Life (10+ lives) 200% of Supplemental Life (10+ lives) Same as Supplemental Life (2-9 lives) $500,000 (10+ lives) 365 days $10,000 for both Included (all groups) Terminates at age 70 (2-9 lives) Same as Supplemental Life (10+ lives) Repatriation of remains actual cost up to $5,000 Spouse tuition actual cost up to the lesser of 5% employee amount or $5,000 Childcare actual cost up to the lesser of 5% employee amount or $2,500 Child education actual cost up to the lesser of 5% employee amount or $5,000 All of Tier One provisions, plus: Permanent and total disability = 1% of principal amount Paralysis benefits (Quadriplegia 100%; Paraplegia 50%; Hemiplegia 50%; Uniplegia 25%) Common carrier maximum of $250,000 Not available Notes: Supplemental Life coverage is essentially a Voluntary plan written under the umbrella of our Group products. At least one eligible employee must apply and be approved for Supplemental Life in order for the coverage to be written. An applicant cannot be covered for Supplemental Life if his/her Basic application has been refused or declined. No exceptions. For takeover Supplemental amounts, it is allowable, at the Underwriter s discretion, to grandfather existing amounts from the prior carrier. However, a re-enrollment between the date of the sold quote and the effective date of the new plan must be handled with extreme caution in order to mitigate any adverse risk. Evidence of Insurability is required for new additions and for amounts over the guarantee issue and grandfathered amount. Annual Enrollment is allowed only when priced accordingly by a Large Group Proposal Underwriter (usually on Cafeteria-style plans). Therefore, for manually-rated cases, Annual or Open Enrollment is not available. 17

22 Voluntary Life Plan Provisions Plan Schedule Maximum Increments of $10,000, up to 5 times salary The lesser of $300,000 or 5 times salary Minimum Amount $10,000 Waiver of Premium To age 65 Accelerated Death Benefit Guarantee Issue (minimum of 10 employees must be enrolled in order to qualify) Includes terminal illness, or unable to perform one or more ADL, or a cognitive impairment 75% to $250, enrolled lives None eligible lives 10 enrolled and 20% participation: $50, eligible lives 20% or greater participation: $75,000 Less than 20% participation: $50, eligible lives 20% or greater participation: $100,000 Less than 20% participation: $50, eligible lives 20% or greater participation: $150,000 Less than 20% participation: $100,000 Age Reduction 35% at age 65, 50% at age 70 Portability Conversion Spouse Maximum Amount (Subject to state availability) (Employees must enroll) Included Included Up to $200,000 (2-9 eligible employee lives) Up to $300,000 (10+ eligible employee lives) Child(ren) Maximum Amount Up to $10,000 Spouse Guarantee Issue None (2-9) $20,000 (10+ enrolled employees) Spouse Age Reduction Domestic Partner Coverage Rate Guarantee Terminates at age 70 for 2-9 (eligible employee lives) Matches employee s reduction option for 10+ (eligible employee lives*) Optional for all groups where available 24 months (standard for all groups) Note: Voluntary Life may be sold with Employer Paid Group Life. Voluntary Life must be quoted on a separate proposal. Can not offer both Voluntary and Supplement Life with Employer Paid Life. One or the other may be sold. Employee must be enrolled in Voluntary Life for spouse and or child to enroll in Voluntary Life. All Voluntary Life underwriting rules apply. 18

23 Voluntary AD&D Plan Provisions AD&D Amount Same as Voluntary Life AD&D Maximum Amount Lesser of 5x salary and $300,000 Definition of Loss Airbag and Seatbelt Benefit Loss Due to Exposure and Disappearance 365 days $10,000 for both Included Age Reduction/Termination 35% at age 65; Terminates earlier of retirement or age 70 Voluntary Standalone Package Spouse AD&D Child AD+D Plan A, B, or C (see Product Manual for details) Only available on 10+ lives Same amount as employee Voluntary AD&D Not available 19

24 Voluntary Standalone AD&D Plan Provisions Plan A Plan B Plan C Minimum number of employees 10 eligible employees 10 eligible employees 10 eligible employees and 2 enrolled and 2 enrolled and 2 enrolled Employee Amount $25,000 increments to $25,000 increments to $25,000 increments to $250,000 $350,000 $350,000 Spouse Amount 50% of employee 60% of employee 60% of employee principal amount principal amount principal amount Dependent Child(ren) Amount 10% of employee 15% of employee 15% of employee principal amount principal amount principal amount Definition of Loss 365 days 365 days 365 days Exposure and Disappearance Included Included Included Seatbelt Benefit Lesser of $10,000 or Lesser of $10,000 or Lesser of $10,000 or 10% of principal 10% of principal 10% of principal amount amount amount Airbag Benefit Not Included Lesser of $25,000 or 10% of principal amount Lesser of $25,000 or 10% of principal amount Rehabilitation Benefit Not included Lesser of actual cost or $5,000 Lesser of actual cost of $5,000 Common Disaster Benefit Not Included Included Included Daycare Benefit Not included Not included Actual cost to lesser of $5,000 or 5% of principal amount Coma Benefit Not included Not included 1% of principal amount Tuition Not included Not included Actual cost to lesser of $5,000 or 5% of principal amount Child(ren) Additional Indemnity for Dismemberment Not included Not included Double the child amount to $100,000 Travel Assist Included Included Included Instant Access Account Included Included Included Spouse or Child AD&D Not available Not available Not available Note: Can not be quoted next to any other Life or AD&D product. Medical Underwriting Requirements for Life Amounts Subject to EOI. 20

25 Additional 10+ Underwriting Guidelines Non-Medical Maximum Issue Formula (3-Times Rule) The 3-times rule (commonly referred to as Guarantee Issue ) calculation is used to determine the maximum amount (up to $500,000) of life insurance that the Underwriter MAY approve for groups over 10 lives. All maximum issue schedules must adhere to the formula. Amounts, which exceed the following limits for lives, are subject to prior Home Office approval: New Coverage $100,000 Replacement Coverage $150,000 The maximum issue limits are to be determined in accordance with the following formula: 1. Take only the top 10 benefit amounts if on a salary schedule (A) or the top 10 employees relative to a class (B) if on a class schedule. EXAMPLE A EXAMPLE B Number of Employees Salary Number of Employees Class Amounts 1 $100, $150, , , , , , , , , Drop the number of employees from the top salary (A) or class amount (B) to the next highest level. RESULT: EXAMPLE A EXAMPLE B 3 employees at a salary of $75,000 7 employees in Class 2 at $100, Multiply appropriate number of employees by either salary amount (A) or class amount (B). RESULT: EXAMPLE A EXAMPLE B $460,000 $850,000 ( ) ( ) NOTE: ONLY USED 3 EMPLOYEES OUT OF 8 IN CLASS 3 TO OBTAIN THE NECESSARY 10 EMPLOYEES 4. Divide that answer by 10 and multiply answer by 3. RESULT: EXAMPLE A EXAMPLE B Maximum Issue = $138,000 Maximum Issue = $255,000 21

26 Additional Examples The following are examples where literal application of the 3-times rule may either overstate or understate the maximum issue level. If the schedule is salary-based, the top benefits should be considered as equal if the amounts are similar. EXAMPLE C If the top 10 benefits are as follows (zeros omitted): $350 $80 $348 $70 $346 $60 $100 $50 $90 $40 Based on Examples A and B, your 3-times rule calculation would be: = $1, = $ = $459,600 Based on this calculation, it might appear that the group would qualify for the full $350,000 maximum issue. However, in this example, since the top 3 benefits are close, instead of dropping $350 to $348 and performing the calculation, the top 3 benefits should be considered the same, dropped to $100, and the calculation should be done as follows: = $ = $237,000 Based on this result, the case does not qualify for the 350,000 maximum issue. EXAMPLE D Assume the following life schedule has been requested for a law firm. Classification Number of Employees Benefit Lawyers 12 $150,000 All Others 15 $25,000 Based on Examples A and B, by dropping the top benefit to the next highest class, the 3-times rule calculation would be as follows: 10 $25,000 = $250, =$ 75,000 Based on this result, the group would not qualify for a maximum issue of $150,000. However, in this case, $150,000 maximum issue might be considered on the basis of the following reasoning: When there is a lopsided schedule such as the above, and the group s makeup is such that an acceptable carve-out class, (10 or more employees) can be created, the 3-times calculation should be done for each classification. Therefore, in this example, do not drop the class 1 benefit amount, but do the calculation as follows: 10 $150,000 = $1,500, = $450,000, making the $150,000 maximum issue acceptable. 22