Final answer:
Group life insurance is a type of employment-based insurance where an employer provides life insurance coverage for a group of employees under a single policy. It's typically easier and less expensive to obtain compared to individual policies because it doesn’t require individual underwriting. Premiums are based on the overall risk of the group, and beneficiaries receive a death benefit if an insured member passes away.
Step-by-step explanation:
Understanding Group Life Insurance
Group life insurance is a type of insurance policy designed for a collective of individuals, such as employees at a company. Unlike other forms of private insurance, which may be purchased by an individual directly (direct-purchase insurance), group life insurance is typically offered as part of employment-based insurance benefits. The policy is owned by an employer and provides life insurance coverage to a group of employees under a single master contract. Members of the group receive a certificate of coverage that serves as proof of their insurance. Group life insurance is advantageous because it often doesn't require individual underwriting, making it easier and often less expensive for individuals to obtain coverage.
Group life insurance policies are paid for through premiums. These premiums are managed by an employer and can be solely employer-funded, or a combination of both employer and employee contributions. The insurance company determines the cost of the premiums based on the probability of certain events occurring within the group of insured individuals. If an insured member passes away, the designated beneficiaries receive a death benefit from the policy. This kind of policy is part of an array of insurance products people can access, which also includes health insurance, car insurance, and house insurance among others.
In summary, group life insurance is mainly an employment-based benefit that provides life insurance coverage for a group of employees, without the need for individual underwriting. This type of insurance is beneficial as a part of the risk management strategy for households and firms, by sharing the risk across a group of people and guaranteeing financial support in the event of an insured individual's death.