Under California Insurance Code Section 10270.5(4), which condition must an association meet before it may sponsor group disability insurance for its members?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
CIC Section 10270.5(4) allows group disability coverage to be issued to an association or trust with a minimum initial membership of 100 persons, organized and maintained in good faith for purposes other than obtaining insurance, and in active existence for at least two years with a constitution and bylaws requiring meetings at least annually. The statute also requires member voting rights and representation on the governing board. The rationale is anti-selection: only a genuine association with a bona fide purpose and a stable membership produces a credible, long-lived risk pool rather than a vehicle assembled just to buy coverage.
Why the other options are wrong
- B) An association formed for the purpose of obtaining insurance is exactly what the statute disqualifies; the membership and existence tests are also far higher than 25 members, so both parts of this answer are wrong.
- C) The statute does not require an agent to sponsor the association; the eligibility tests concern the association's own structure and history, so this injects a requirement the law never imposes.
- D) The 100-member and two-year tests apply to the association's membership, not to employee headcounts of an employer, so this confuses the association rules with employer-group rules.
Memory hook
A real association is a club with a purpose, 100 members, and two years of history — not a shopping club for insurance.