West Virginia State Life Insurance Practice Exam

What type of life insurance policies are commonly utilized for group life insurance?

1. Whole life insurance

2. Annually renewable term

3. Universal life insurance

4. Variable life insurance

The correct answer is: Annually renewable term

The choice of annually renewable term life insurance for group life insurance is based on its inherent characteristics that align with the needs of groups and organizations. This type of policy provides coverage on a year-to-year basis, allowing members of a group to be insured without the need for individual underwriting at the time of enrollment. Annually renewable term policies are cost-effective and straightforward, making them ideal for group situations where a large number of individuals are covered under a single contract. These policies typically provide a death benefit that remains the same, but the premium may increase each year as the insured group ages. This feature is advantageous for employers or organizations that want to offer life insurance to employees or members as a simple benefit. In contrast, whole life insurance, universal life insurance, and variable life insurance generally cater to individual needs, providing more complex structures that involve cash value accumulation, investment options, or premiums that can change over time. These features make them less practical for group arrangements, where the goal is often to provide straightforward and affordable coverage to a large number of people.