Questions and Answers
What is the main difference between group insurance and individual insurance?
What does group insurance cover?
multiple people
Individual insurance policies can cover more than two individuals.
False
What is the typical face amount for ordinary life insurance?
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Which of the following is a characteristic of permanent life insurance?
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What type of insurance policy was industrial life insurance originally recognized as?
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Group insurance is typically more expensive per person compared to individual insurance.
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Study Notes
Group vs. Individual Insurance
- Group insurance policies cover multiple unrelated individuals, while individual policies cover a single person.
- Structure difference: group insurance has one master policy owned by an organization, individual insurance is a standalone policy for the insured.
Group Insurance
- Typically owned by an employer or organization, covering ten or more participants.
- Participants receive individual certificates of coverage but do not own the policy themselves.
- More cost-effective per person compared to individual insurance.
- Groups must not be formed solely for obtaining insurance, qualifying examples include employers, labor unions, and professional associations.
Individual Insurance
- Provides personal protection, covering typically one person, with some joint options available.
- Policy owner and insured can be different individuals.
Ordinary Life Insurance
- Issued in face amounts starting at over $25,000, and can be as high as $1 million or more.
- Offers flexible premium payment options: monthly, quarterly, semiannually, or annually.
- Popular due to extensive flexibility in products and plans available.
Industrial Life Insurance
- Historically known as “burial insurance,” now serves modest death benefit needs ranging from $1,000 to $10,000.
- Policies typically require no medical exam and premiums are collected frequently (often weekly).
- Personal interaction with agents is common for premium collection.
Permanent Life Insurance
- Designed to provide lifelong coverage until the insured's death or age 120.
- Policies maintain level premiums throughout the duration, provided premiums are paid.
- Features cash value accumulation, which can be accessed while the policy is in force, offering a “living benefit.”
- The death benefit may be reduced if loans are taken against the cash value; the outstanding balance impacts the payout upon death.
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Description
Test your knowledge on the various classifications of life insurance policies, particularly focusing on the differences between group and individual insurance. This quiz will enhance your understanding of how coverage works and the structural differences in insurance contracts.
