Under California Insurance Code Section 10270.5, which entity may qualify as the policyholder of a group disability insurance master policy?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
CIC Section 10270.5 defines a group disability policy as a master policy issued to a qualifying policyholder — for example, an employer covering at least two employees, an association with a constitution and bylaws formed and maintained for purposes other than obtaining insurance, or an association or trust with a minimum membership of 100 persons and at least two years of active existence. In every case the plan must preclude individual selection of insurance amounts. These structural requirements distinguish lawful group coverage from informal pooling arrangements.
Why the other options are wrong
- B) A policy covering one person is an individual policy, not group insurance; group coverage requires a master policyholder and a defined class. Group coverage requires a policyholder and a defined class of insureds.
- C) Informal groups of friends are not recognized eligible groups under Section 10270.5; the statute requires employer, association, or other specified structures. The statute lists specific qualifying policyholder structures only.
- D) An association must be formed and maintained in good faith for purposes other than obtaining insurance; an association created just to buy insurance fails the statutory test. A genuine common purpose must exist before the insurance.
Memory hook
Group master policies need a real sponsor: an employer, a bona fide association — never just a bunch of friends pooling money.