What is the primary advantage of group life insurance?

What is the primary advantage of group life insurance?

• A. It provides extensive individual underwriting.
• B. It often offers lower premiums due to collective risk.
• C. It allows for customization of each policy.
• D. It restricts coverage to specific health conditions.

Answer: (B)

The primary advantage of group life insurance is that it often offers lower premiums due to collective risk. In a group insurance plan, risks are pooled among a larger number of individuals, which typically leads to a reduction in costs. This pooling effect spreads the risk across all members of the group, reducing the overall risk that the insurer faces. As a result, the insurer can lower the premium rates compared to individual life insurance policies that require more personalized underwriting and assessment of risk. This approach makes group life insurance an economically attractive option for both employers offering it as a benefit and employees who may pay less for the coverage than they would for an individual policy. Additionally, group life insurance often does not require individual medical underwriting, further simplifying the process for participants. In contrast, options that suggest extensive individual underwriting or customization of each policy are generally characteristics of individual life insurance and do not apply to group policies. Similarly, restricting coverage to specific health conditions contradicts the fundamental principles of group insurance, which are designed to provide inclusive coverage for all eligible participants, not limit it.

The primary advantage of group life insurance is that it often offers lower premiums due to collective risk. In a group insurance plan, risks are pooled among a larger number of individuals, which typically leads to a reduction in costs. This pooling effect spreads the risk across all members of the group, reducing the overall risk that the insurer faces. As a result, the insurer can lower the premium rates compared to individual life insurance policies that require more personalized underwriting and assessment of risk.

This approach makes group life insurance an economically attractive option for both employers offering it as a benefit and employees who may pay less for the coverage than they would for an individual policy. Additionally, group life insurance often does not require individual medical underwriting, further simplifying the process for participants.

In contrast, options that suggest extensive individual underwriting or customization of each policy are generally characteristics of individual life insurance and do not apply to group policies. Similarly, restricting coverage to specific health conditions contradicts the fundamental principles of group insurance, which are designed to provide inclusive coverage for all eligible participants, not limit it.