LLQP Life Insurance · Component 2.1 · 30% of the exam
Which of the following is generally TRUE about premiums for group term life compared with individual term life for the same person?
- AGroup premiums are guaranteed for life, since the master contract fixes the rate for every member from enrolment
- BGroup premiums are always higher, since the insurer cannot underwrite each member and must price for the worst risks
- CGroup and individual premiums are identical, since both are based on the same mortality tables for the same age
- Group premiums are usually lower per unit, but they rise as the group ages and are not guaranteed for the individual
Correct answer: D) Group premiums are usually lower per unit, but they rise as the group ages and are not guaranteed for the individual
Group rates reflect pooled risk and economies of scale. They are re-rated at renewal based on the group's experience and demographics, and the member has no control over them.
Why the other options are wrong
- AGroup rates are renewed annually and can change.
- BGroup rates are typically lower per unit.
- CPricing bases differ.
Exam tip
Group life: cheaper per unit, no individual control, re-rated at renewal.
Common mistake
Treating a group rate as a personal, guaranteed premium.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.