West Virginia State Life Insurance Practice Exam

Why might organizations prefer group life insurance over individual policies for their members?

1. Individual policies have stricter eligibility requirements

2. Group policies typically include less coverage

3. Group policies are easier to administer and less expensive

4. Individuals have more control over their benefits

The correct answer is: Group policies are easier to administer and less expensive

Organizations often prefer group life insurance over individual policies primarily because group policies are easier to administer and generally less expensive. When an organization offers group life insurance, it can cover a large number of employees under a single policy. This reduces administrative burdens since there is no need to underwrite each member individually, which streamlines the process for both the employer and the insurer. Additionally, because insurance companies can spread the risk over a larger pool of insured individuals, they are able to offer lower premiums on group policies compared to individual policies. This is advantageous both in terms of cost savings for the organization and providing affordable coverage for employees. Moreover, group life insurance typically provides basic coverage to all eligible members, which is often seen as a valuable employee benefit. The simplicity of enrollment and the absence of medical exams for most group plans make it an attractive option for both the organization and its members. This combination of ease of administration and cost-effectiveness reinforces why organizations lean toward group life insurance as a viable option for providing life coverage.