PSI Life Exam Practice Test

What is the main advantage of group life insurance over individual policies?

1. Individual underwriting requirements

2. Generally lower premiums

3. Greater coverage options

4. Higher claims payouts

The correct answer is: Generally lower premiums

The main advantage of group life insurance over individual policies is that it typically offers generally lower premiums. This is due to several factors inherent to the structure of group insurance plans. In a group policy, the risk is spread across a larger number of individuals, which allows insurers to benefit from economies of scale. This pooling of risk usually results in lower costs for both the insurer and the insured. Additionally, group life insurance often involves less stringent underwriting criteria, meaning that individuals with pre-existing conditions may still be eligible for coverage without the individual assessments that can drive up premiums in standalone policies. Thus, this collective approach to insurance not only makes it more affordable for participants but also enables employers or organizations to provide an essential benefit at a lower overall cost compared to what individuals might face when seeking equivalent coverage on their own. Considering the other options: individual underwriting requirements apply specifically to individual policies; greater coverage options are typically more associated with individual policies where customization is possible; higher claims payouts are not a guaranteed feature of group policies as they depend on the terms set by the insurer. Therefore, the primary advantage remains in the lower premium costs offered by group life insurance.