Under California law, which of the following is a permissible eligible group for group life insurance?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California Insurance Code Section 10202.5 authorizes group life insurance for eligible groups such as the employees of a common employer, members of a labor union or association, and certain other defined classes. The core requirement is that the group must be formed for a purpose other than obtaining insurance. Groups formed principally to buy insurance, or ad hoc collections of unrelated persons, do not qualify because they would permit adverse selection and undermine risk pooling. Advisors should confirm that a proposed group has a genuine common bond before placing coverage, because an ineligible group exposes the case to adverse-selection risk and regulatory challenge.
Why the other options are wrong
- B) A random collection of strangers formed to obtain insurance is not an eligible group; qualifying groups must have a common bond or purpose independent of insurance. Strangers with no organizational link do not satisfy the common bond the code requires.
- C) A group created solely to purchase insurance fails the eligibility test; the qualifying purpose must exist apart from the insurance itself. Insurance must be incidental to the group's real purpose, not the reason the group exists.
- D) Customers of a retailer lack the required common employment or organizational bond; they are not a permissible eligible group under the code. Store customers share only a shopping relationship, which the code does not recognize as an eligible class.
Memory hook
Eligible group = a real bond first, insurance second. Strangers with dues? No.