Question

Which of the following is a major risk to an employee covered under an employer's group life insurance plan?

A. Employers pick up all or part of the cost of the insurance
B. Open enrollment is offered on an annual basis
C. The sponsor is issued a master policy
D. The sponsor can elect to discontinue the plan

Answer 1

The main risk for an employee with employer's group life insurance is that the employer might decide to discontinue the plan. This would leave employees without the coverage they previously had, potentially when they may not have easy access to alternative insurance.

Step-by-step explanation:

The major risk to an employee covered under an employer's group life insurance plan is if the sponsor elects to discontinue the plan. Employment-based insurance, often provided in part or whole by an employer, includes health plan coverage that may cover the employee and potentially their family. However, a significant risk arises if the employer decides to discontinue the group life insurance plan, leaving the employee without the provided coverage.

This termination can be due to various reasons such as financial constraints, changes in company policy, or the pursuit of alternative benefits packages. Selling insurance in groups through the workplace helps solve the adverse selection problem, as it combines individuals with varying health risks.

Nevertheless, the dependency on the employer means employees might find themselves uninsured if the company stops providing health insurance and they cannot easily access alternatives like direct-purchase insurance or government-sponsored health exchanges.

The possibility of losing employer-provided coverage emphasizes the importance of understanding the terms of group life insurance and considering additional or alternative coverage options.