South Carolina Life Insurance Practice Exam

What is one advantage of group life insurance for employers?

1. Higher administrative costs

2. Lower premiums per employee

3. More coverage options

4. Mandatory participation

The correct answer is: Lower premiums per employee

One significant advantage of group life insurance for employers is the lower premiums per employee. This is primarily because group life insurance pools the risk among a large number of individuals, allowing for economies of scale in underwriting and administrative costs. When many people are insured under a single policy, the insurer can spread the risk more effectively, resulting in reduced premiums. Consequently, employers can provide a valuable employee benefit at a more affordable rate than they might for an individual policy. This not only enhances the attractiveness of the benefits package offered to employees but also strengthens employer-employee relationships, often aiding in retention and recruitment efforts. The other options do not highlight advantages typically associated with group life insurance for employers. Higher administrative costs would be a disadvantage, while more coverage options are generally seen in individual insurance plans rather than group plans, which typically offer standardized coverage. Mandatory participation can be a drawback for employees rather than an advantage for employers, as it may lead to dissatisfaction if employees do not want or need the coverage.