Under California Insurance Code Section 10270.5, a group disability policy issued to an association must cover not less than what percentage of all eligible members, or of a class of members?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Section 10270.5(a)(3) requires that a policy issued to an association with a constitution and bylaws, formed and maintained in good faith for purposes other than obtaining insurance, cover not less than 25 percent of all eligible members (or of a class of members), with amounts of insurance based on a plan that precludes individual selection. This participation minimum exists to prevent adverse selection, so the risk pool is broad enough to remain stable. The eligible group rules in AH-III.B.1a are a frequent source of California-specific questions on the A&H examination, and the 25 percent threshold is a specific number the candidate is expected to recall.
Why the other options are wrong
- A) Ten percent is not the statutory minimum; the California Insurance Code sets the association participation threshold at 25 percent of eligible members.
- C) Fifty percent overstates the participation requirement; the code does not demand that half of an association's eligible members be covered.
- D) Seventy-five percent is not the required participation level for association group disability policies under Section 10270.5.
Memory hook
Associations must enroll at least a quarter of eligible members.