The cost of a Group Life insurance plan is determined by all of the following EXCEPT which is least important?

• A. The actual overall health of the group
• B. The group’s payroll
• C. The group’s age distribution
• D. The amount of coverage per employee

Answer: (A)

Pricing a Group Life plan is about the risk exposure of the group as a whole, not each member’s medical history. The premium is driven by factors that reflect how much exposure the insurer is taking: the group’s payroll (a practical measure of how many people and how much coverage is in force), the group’s age distribution (mortality increases with age, so a older mix raises expected claims), and the amount of coverage per employee (more coverage means higher potential benefits). The actual health of individuals within the group is less critical because group plans are priced on a collective basis and often involve less or no individual medical underwriting. That’s why health status is the least important factor in determining cost.