Under California Insurance Code Section 10270.5, group disability insurance may be issued under a master policy to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 10270.5 authorizes group disability insurance to be written under a master policy issued to employers, unions, associations, trusts, and other eligible entities listed in the statute. The key requirement is that the group must be formed and maintained for purposes other than obtaining insurance. This prevents adverse selection, because a group organized solely to buy coverage would attract only those who most need benefits. Coverage is offered to a class of members or employees under a plan that precludes individual selection of benefit amounts.
Why the other options are wrong
- B) Group insurance is issued to a group policyholder such as an employer or association, not to an individual small business owner acting alone.
- C) Government agencies are one eligible category, but they are not the only entities that can hold a group master policy.
- D) A group formed solely to buy insurance is not an eligible group under Section 10270.5, which requires a bona fide purpose other than obtaining coverage.
Memory hook
Eligible groups are real organizations first, insurance buyers second. A club created just for coverage fails the test.