Tennessee Insurance Practice Exam

Which statement best describes a characteristic of group Term Life insurance?

1. It requires individual underwriting for each member

2. It is typically less expensive than individual policies

3. It offers permanent coverage to all participants

4. It has no conversion privilege

The correct answer is: It is typically less expensive than individual policies

Group Term Life insurance is designed to provide coverage for a group of individuals, typically through an employer or an organization. One of its key characteristics is that it is generally less expensive than individual life insurance policies. This cost efficiency arises because the risk is spread across a larger pool of participants, and the need for individual underwriting is minimized, meaning that not every participant undergoes the same level of assessment for risk. The collective nature of the policy allows for lower premiums compared to individually purchased policies, making it an attractive option for employers to offer as part of employee benefits. Thus, the statement regarding its affordability captures an essential benefit of group term life insurance, highlighting its accessibility for members of the group. The other statements do not accurately depict group term life insurance characteristics. Individual underwriting is usually not conducted for each member in group plans, coverage is typically temporary and does not provide permanent benefits, and many group term life policies include a conversion privilege allowing members to convert their coverage to an individual policy upon leaving the group.